Three more banks cut term deposit rates as offers bunch up in a tighter range. UDC exits. ANZ is the latest to trim its rate card following Westpac and the Cooperative Bank

Three more banks cut term deposit rates as offers bunch up in a tighter range. UDC exits. ANZ is the latest to trim its rate card following Westpac and the Cooperative Bank
Banks continue to trim back their term deposit rate offers

There are reductions and withdrawals to note in the term deposit marketplace.

Following last week's rate reductions by ASB, more and similar reductions keep getting announced.

In addition, UDC is now on its programme to withdraw from offering term deposits and repay all existing Secured Investments in mid to late 2019 and wind-up the UDC debenture programme. In January, the programme was closed to new deposits. Now customers with existing term investments can no longer reinvest when their deposits mature and will have their investment repaid. (But existing Call Accounts and Dealer Reserve Accounts will remain open for normal use.) There are now only eight finance companies left offering term deposits, and most of these are tiny compared to UDC.

After ASB, the next bank to move was Westpac, which reduced all rates from 18 months to five years by -5 basis points.

It was followed by the Co-operative Bank which trimmed -5 and -10 bps from its rate offers for terms of 2, 3 and 4 years.

Today (Wednesday), ANZ has pulled back some of its better long term offers, settling where its rivals are. It reduced its 18 month offer by -5 bps to 3.40%, and its two year offer by a similar reduction to 3.45%. Its three year offer has been cut by -10 bps to 3.50%, its four year offer has been cut by -15 bps to 3.55%, and its 5 year offer is down -20 bps to 3.60%.

ANZ also switched its 3.40% nine month offer to apply for an eight month term.

And for the record, NZCU South has also trimmed all its rates for terms of one year and longer.

Generally, these bank reductions will not affect many depositors with term investments because the vast majority of money is in terms of one year or less. But these widespread longer term reductions may signal that lower rates are coming in the near future for shorter terms as well.

At this time rate offers are fairly tightly bunched in a 3.25% to 3.80% range over all terms. For most terms the offers by Heartland Bank are at the top end of the range, although Kiwibank's 3.40% six month offer is notable as well, as is their three year 3.70% rate.

The updated 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 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 3.40 3.45 3.50
ASB AA- 2.95 3.25 3.40 3.35 3.40 3.45 3.50
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 3.40 3.45 3.50
Other banks                
BBB 3.00 3.25 3.30 3.35 3.40 3.45 3.50
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 3.25 3.30 3.40 3.40 3.50 3.65
A- 2.90 3.15 3.20 3.25 3.45 3.50 3.65
Selected fincos                
FE Investments B   4.80   5.00 5.40 5.50 5.60
Liberty Finance BBB- 3.60 3.95 4.25 4.30 4.35 4.40 4.45

Term deposit rates

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37 Comments

With interest rates as low as this , those over 65 who have savings and use interest are really not getting a fair deal .

its all about debt now
no wonder heartland are growing their reverse mortgage book at a quick rate

That is possibly why shares have also gone up so much ,as baby boomers have moved money from the bank into shares,

Baby boomers are terrified of shares for whatever reason. They'd all be far wealthier if they'd stuck with a good ETF instead of this 20 year term deposit nonsense.

13
up

The hard-working savers are being penalised to protect speculators.

The savers will be contributing to the bank's increased capital ratios(via increased profits for banks as interest rate margins increase)

Ummm sorry to burst your bubble, but the vast majority of household deposit growth in NZ is due to real estate activity, not due to hard work. And yes I can prove it on request.

The savers are getting paid by the speculators, landlords and home owners through mortgage payments. Savers are just pissy that they don't get a bigger cut. Stop funding the banks and housing and try investing in a business directly. Otherwise suck it up and be thankful for what you got.

Investment 101 - returns are commensurate to risk. Oldies want to play it safe with their savings and leave it in the bank then they get the low returns that comes with that safety. If they want to earn more then put their money in other more risky investments.

Those over 65 got the best run that any generation ever will. Best of everything. They took it all and left the bill.

They have no right to moan

I guess with such low interest rates already minor cuts such as these make little difference. You shouldn't be getting free money for just having money in the bank anyway, you should be investing in something worthwhile like Auckland property!

Or waikato property!!!!!

You mean Wellington property of course

Auckland property bwhaha. Good joke, love the punch line!

After tax and 'real' inflation, there isn't much left, so isn't free money. Plus banks are using that money to make money themselves via lending, no different to any other investment. So banks in this case are the middleman that take their cut, for very little risk that I can see. Plus there is risk for savers in banks, because NZ banks are not guaranteed, so potentially savers could lose at least some of their money if a bank had to be bailed out.

I can see why people have put their money into property instead, with such poor returns. Even with looming CGT, which IMO isn't a problem, just means that the house will have to sell for more to make up for that loss, thus pushing up house prices.

Slight problem being you need to find a sucker that is willing and able to pay/borrow that higher price to buy the house. Better hope wage inflation steps up to the game otherwise there will be no-one to buy it.

Million dollar 20 year P&I mortgage even at 4% interest is $1400/week. But according to stats NZ Median weekly income from wages and salaries increased $38 (4.0 percent), to $997 in the June 2018 qtr.

So 1.4 median incomes just to service the mortgage? No kids? Or maybe we need to move from relationships being (generally) about couples to Triples? Hubby and wife #1 go to work while wife #2 has kids? Or wife stays home while both husbands go to work?

"Better hope wage inflation steps up"
Or interest rates drop significantly, which more likely

To what?

Halving interest rates to 2% and the servicing cost only drops from $1400 to $1170/week. At zero interest its still $962/week to pay the principle back in twenty years. ie, more than a median wage.

So without wage inflation catching up to property prices it just wont work, Normal couples won't be able to afford to have kids, and eventually the property ponzi falls over when the buyers run out. Sorry, but your and Robs ever escalating prices (without corresponding wage inflation) just don't work..

Oh, and in your wet dream scenario, as the house prices go up, and the interest rates go down, it'll take even longer for that young couple to save the deposit.. So once they save the deposit by age 40, move in and make a dent on the mortgage, it's too late for them to have kids. Maybe this is how PDKs population reduction really happens. But is suspect we'd get to a "let them eat cake" moment long before then.

So much wrong with your analysis. Median incomes do not buy 1.25 million dollar homes. They buy more like 800K and wont typically have loans much above $640,000. They almost always will use a 30 year term, so payments at 2% are actually $550 per week. Median household makes about 90K, or 75K after tax. Thats $1,400 per week. So the loan is about 1/3 of the households after tax income...

At present... not in Rob and Yvil's fantasy world where they can just up the selling price to compensate for Capital gains tax. regardless, the basic premise stands. If houses prices keep rising faster than incomes, eventually nobody can buy. And all that you do by going to a 30 year mortgage, or lower interest rates is kick that can down the road. Sooner or later you hit the limit.

I see, well so much wrong with their analysis then as house prices are set by affordability and as you say that has limits.

..you need credit growth to do that.

Here's how families will be able to afford buying their house - co-ownership.

BNZ has come up with an innovative financing solution - aren't banks just so innovative with their financing solutions?

https://www.bnz.co.nz/about-us/media/2018/bnz-supports-shared-ownership-...

https://youtu.be/Kb-bQRVJlxM

If the loan product takes off, you might see other banks developing similar products to provide this financing solution.

No deposit. No problem. Uncle Tony from BNZ will find you a trusted loan shark.

Lower interest rates are an ongoing phenomenon.
Go back to 2009 until 2019, lower interest rates, and remaining low rates.

Lower interest rates are an ongoing phenomenon.
Go back to 2009 until 2019, lower interest rates, and remaining low rates.

Right down to negative interest rates? Because at some future point the principal of the loan will exceed the lifetime earnings of the median couple. Or will there be such a wealth distribution policy that nobody has to pay for actual living expenses, they get food, transport etc 100% subsidised.. all paid for out of tax on landowners?

Could drop the OCR another 600 basis points like the RBNZ did to save NZ from “GFC”. Negative 1.5% mortgage interest rates on a $1 million dollar interest only mortgage is $15k p.a. Talk to Yvil’s bank, I hear they extend IO lending to infinity.

Principle or principal - still, I guess both are relevant.

whoops. fixed.

But I notice no attempt to refute the point that house price (& rent) inflation can't keep exceeding wage inflation indefinitely without mortgages eventually becoming unservicable for both Owner occupiers and eventually landlords.

That is an interesting point that even if interest rate is zero that the repayments on principal alone on a large loan is still a big repayment(s).

In the proposed environment of ultra low rates house prices would simply stagnate at very high levels and then oscillate around some 'fair value' based on the new perception of long term average rates and then begin to track income growth rates over a long period of time. Home ownership rates would fall and investors would likely boarder on cartel like domination of the market.

"Home ownership rates would fall and investors would likely boarder on cartel like domination of the market."

Hmmm, or would this pesky democracy thing kick in, and the public vote to "adjust" how that whole equation works?

Thomas Piketty said the increasing concentration of capital and the harm to the average growth rate that it causes has never been reversed by means other than catastrophe. So if he is right then yes, perhaps heads would roll.

Since banks are handing out sub 4% mortgages, obviously term deposit rates need to go down to maintain the banks profit. It's all about the profit.