Despite mortgage rates trending lower, recent moves on term deposit rates by two major banks suggest a rising trend

Some key mortgage rates have moved lower recently with a small set of banks offering rates below 4%.

But there has also been some movement in term deposit rates as well, and surprisingly, they are not all down.

Chinese New Year is upon us again and there will be the inevitable tweaking of rates to get the number 8 in there. But both Kiwibank and BNZ have made changes that are worth noting.

Kiwibank has set its 6 month, 9 month and 12 month term deposit rate at 3.40%. This involved a -5 bps rise for six months, no change for nine months, and a -10 bps reduction for 12 months.

Then BNZ made its changes. The key ones to note are its nine month rate has risen +13 bps to 3.38%, its one year rate has risen +15 bps to 3.55% and its five year offer is now at 3.88%, a rise of +18 bps.

The BNZ 3.55% one year offer arrived just as Kiwibank abandoned that pricing point. 3.55% for one year is in fact a market leading position (as is 3.40% for six months).

Most banks are deposit-funded so these costs are the primary driver of bank margins. And these rates very much limit how low mortgage rates can go. To go much lower (other than for attention-grabbing 'specials'), that will mean that deposit rates will have to be cut and there are no signs yet that that is imminent.

In fact, the Kiwibank and BNZ rates are somewhat surprising because they suggest a firming trend.

Yes, wholesale swap rates are low and near record lows at the short end (one and two years). But apart from the four large Aussie banks, no others have significant wholesale funding. And even the Aussie-owned banks have less than 15% of their funding from wholesale sources.

Generally Heartland Bank, and Chinese retail bank ICBC, offer the highest rates over most durations. Today's Kiwibank offer is an exception, pushing them to the forefront on a key rate offer.

And rates on offer in New Zealand are significantly higher than those available from the same institutions in Australia.

Rates in the table below are the highest offered by each institution for the terms listed. You however will need to check how often interest is credited or paid. That important factor is not filtered in the above table and rates with various interest payment/credit arrangements are mixed here. However, our full tables do disclose the offer basis.

Our unique term deposit calculator can help quantify what each offer will net you.

All carded, or advertised, term deposit rates for all financial institutions for terms of less than one year are here, and for terms of one-to-five years are here.

Term PIE rates are here.

The latest headline rate offers are in this table.

for a $25,000 deposit Rating 3/4 mths 5/6/7 mths 8/9 mths 1 yr 18 mths 2 yrs 3 yrs
Main banks                
ANZ AA- 3.00 3.25 3.40 3.40 3.45 3.50 3.60
ASB AA- 3.00 3.25 3.40 3.45 3.45 3.50 3.65
AA- 2.88 3.28 3.38 3.55 3.38 3.50 3.55
Kiwibank A 2.95 3.40 3.40 3.40   3.55 3.70
Westpac AA- 2.95 3.25 3.35 3.40 3.45 3.50 3.65
Other banks                
BBB 3.00 3.20 3.30 3.35 3.40 3.50 3.60
Heartland Bank BBB 3.25 3.35 3.50 3.50 3.60 3.70 3.80
HSBC Premier AA- 2.60 2.90 2.90 2.90   2.90 3.00
ICBC A 3.10 3.40 3.40 3.50 3.60 3.70 3.80
RaboDirect A 2.80 3.30 3.30 3.35 3.55 3.55 3.70
RaboDirect BBB 2.90 3.15 3.20 3.45 3.45 3.60 3.70
A- 2.90 3.15 3.20 3.25 3.45 3.50 3.65
Selected fincos                
FE Investments B   4.80   4.50 5.40 5.50 5.60
Liberty Finance BBB- 3.60 3.95 4.25 4.30 4.35 4.40 4.45
UDC BBB 2.85 3.25 3.40 3.45 3.45 3.50 3.60

Term deposit rates

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the fight for capital begins?

Yup - maybe. If it's not the underlying reason, it probably soon will be.

I always ask, and usually get, a better term deposit rate than those advertised.