ASB the latest to cut term deposit rates and the premium for longer terms dissolves. Range between banks temporarily wide at present

ASB the latest to cut term deposit rates and the premium for longer terms dissolves. Range between banks temporarily wide at present
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ASB's sharp cut in some home loan rates has brought a matching cut in their term deposit rate offers.

But the bank didn't cut every rate; in fact it raised the six month rate to 3.40% from 3.25% (shifting the incentive from nine months).

However some of ASB's reductions were quite large with -10 basis points shaved off the one year rate, -20 bps off the 18 month offer, and -25 bps off all offers longer.

ASB isn't the first to trim rates in this new round, but it is the most aggressive.

ANZ started the move for all its rates of two years and longer.

Westpac and SBS Bank then made some targeted reductions.

And the Co-operative Bank trimmed rates across the board, also with the biggest cuts at the long end.

However, not all banks have shifted down yet. And that has opened up quite a wide range.

For example, for the popular six month term, there is a 15 bps range between 3.25% and 3.40% a month the main banks and wider among all banks.

For one year, the range is similar. But if you go out to two year terms and include all banks the range is 50 bps. Shopping around at the moment will pay off. But the window of opportunity may be relatively brief. Remember it is a sinking market for term deposit offers, matching the declining rates in the home loan space.

These rates have a big impact on bank cost of funds, more so than wholesale money rates. So don't expect banks to be soft touches when you try to negotiate some sort of premium. Even a deposit of $100,000 may not attract a premium these days. Switching is probably your best bet at this time if you need a better yield.

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
8/11 mths 1 yr 18mths 2 yrs 3 yrs
Main banks                
ANZ AA- 3.00 3.25 3.40 3.40 3.40 3.40 3.40
ASB AA- 2.90 3.40 3.25 3.25 3.20 3.20 3.25
AA- 2.90 3.25 3.35 3.40 3.40 3.45 3.50
Kiwibank A 2.95 3.40 3.40 3.40   3.45 3.50
Westpac AA- 2.95 3.25 3.40 3.40 3.40 3.45 3.50
Other banks                
BBB 2.90 3.20 3.25 3.30 3.25 3.30 3.40
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 3.45 3.50
A- 2.90 3.15 3.20 3.25 3.40 3.50 3.50

Term deposit rates

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Am I correct in thinking that those term deposits are holding the cash which is needed by the banks to support their lending books and minimise the need to obtain overseas funding?

The problem with TSB’s rate match offer is that they make you fill out all this paper work and then you discover that the only thing they will match is the mortgage rate. Given that they are a smaller bank one would think that they should beat both the mortgage rate and any cash incentive offered by the major banks in order to attract customers.

Hopefully there is some sympathy for the following from the potential FHB whom there has been considerable widespread concern and support for the issues that they face.
The historically low and currently now likelihood of even lower term deposit rates will be creating considerable hardship for current retirees. Many current retirees from the 1980s to 2011 experienced the norm of term deposit interest rates around the 6 % or so. (They also experienced mortgage interest rates of 8 to 10% with first mortgages being 25% for a relatively short period).
A signifcant group of current retirees would have planned and saved a lump sum for retirement (mainly without the benefits of KiwiSaver) expecting similar term deposit rates and returns. At little more than 3% - and real risk of decreasing rates - effectively those returns and income are half what they could have expected as for rates which were the norm over a 30 year period. So that $500,000 (without significant KiwiSaver benefits) rather than producing $30,000 p.a. as planned, is actually producing only $15,000.
As banks source over 70% of their funds domestically (interest.co), which will be funding mortgages at historically low rates, I would like to see at some acknowledgement from FHB generation that this is what a number of retirees are sadly facing.
I am not holding my breath in anticipation.

Sorry nope no sympathy here I’m not sure what your point is? Every generation has its challenges so I’ve read countless times, retirees need to stop thinking the world owes them and maybe try cutting back on the expenses like avocado, Sky Tv and the latest Toyota Vitz’s.

Nzdan,

Indeed,every generation does face its own challenges. I grew up in a world where going to university did not entail taking on large debts. My sons grew up in a world where they did not have the pressures of social media to deal with and their children will have different pressures such as climate change .
However,for you to label all retirees as well off bludgers is just offensive. i am a well off retiree and I am well aware of my good fortune,but through my voluntary work,I know that many exist on just their pension or perhaps a little more. perhaps in time you will learn to be more charitable.

So as per your own example, those that planned and saved did okay, those that thought the world owes them a living and failed to plan, didn't do so well. The first lot don't need sympathy, the second lot are reaping the results of their actions. They certainly didn't have it particularly hard, living in the economic boom, and suffering through double digit wage inflation to reduce their debt servicing costs (that unaffordable mortgage, at 3x a single working income).

And yes, I am aware there will be some who did plan and take reasonable steps to save for their retirement but had a bit of misfortune of some sort along the way and never quite got back on track. Those are the ones that deserve sympathy, and they get my sympathy, but those that didn't have any misfortune, and just didn't make any allowance for real saving for their own retirement.... nah.

Sorry, still nothing from me. You could try rally up more of your well off peers and have them help you lift struggling retirees out of poverty? You’re not going to find much charity from millennials, they’re too busy working to save for a deposit many times their annual income on record low interest rates while paying market rent and a student loan.

And once they have saved up and gotten a mortgage those millennials will be paying a monthly mortgage that is a much lower percentage of their income... different times, different issues. Not sure whether one generation has it easier or harder than another generation. It does seem clear than there is in increased incidence of whinging, but I think every generation complains about the succeeding generation. That said, complaining about the preceding generation appears to be a rather new phenomenon. I remember my "low interest" student loan (at only 7% APR!) from nearly 40 years ago... and the usurious fees attached to the origination of the loan. Borrow $10k, and receive barely $8k after the origination fees.

As to saving at record low interest rate in a record low inflation environment, this is far better than the alternative. If one is getting 15% interest in a 12% inflation environment (and housing is going up at 18%), it is also very hard to get that down payment as the required target is moving higher rather rapidly. Again, different issues for different generations. Concluding that the prior generation had is so much easier is using some very strong filters.

Interesting. I wonder how much the typical Kiwi household spends on housing and food today?
https://nzhistory.govt.nz/culture/the-1980s/overview

Consumption
Thanks to inflation the average weekly wage soared from $285 in 1984 to $529 in 1989, though in real terms the increase was less than 10%. By decade’s end a typical Kiwi household spent around $120 per week on housing and $92 on food, equivalent to $215 and $165 respectively in 2018.

As for your comment about inflation, yes 15% interest when houses go up 18% is probably not ideal, but a 20% deposit was 6 months wages instead of 2 years wages like it is today. Plus today it's a max 3% return on savings, but house prices are consistently going up double digits in the regions after years of the same in Auckland, a much bigger net interest spread.

Cherry pick data much???

For much of the past decade, the regions have had essentially zero house price appreciation. Well, until around three years ago... In point of fact, from 2008 to 2015 it was clearly cheaper to rent than to own due to this lack of house price appreciation (and I took full advantage of this fact and had my landlord subsidize my housing costs during this period, paying my rent from a portion of the proceeds from term deposits of the value of the home that we rented). This lack of house appreciation in the past decade was a very good thing for up and coming FHB that were saving prior to their first purchase. A decade ago they could get 8% or more on a term deposit while saving for a down payment, and did not have to chase a moving target in terms of house price.

As for savings rates, I'd recommend using the nice term deposit data available on this website... even with the rate cuts of late, there are plenty on offer above your "max 3% return" even before asking about discretionary rates (I tend to get 0.1% to 0.2% above the carded rates, just have to ask)
Ref: https://www.interest.co.nz/saving/term-deposits-1-to-5-years

Hence my comment suggests the regions are going up double digits after years of Auckland doing the same. At the end of the day, i've heard plenty of blah blah about how boomers struggled but i'm yet to see any real definitive data to support that. The closest i've come is people trying to claim household income as a measure, ignoring the distortion that today's household income is 2 wage earners instead of 1.

None of the banks offer a 4.3%+ term deposit, which is required to get a 3% return.. don't forget the govt snaffles 33% of your interest in the form of RWT.

I think your maths is off.

It's true that there are record low INTEREST RATES, however, since the DEBT is larger, the actual repayments will be a much higher percentage of their actual income (especially if adjusted down to a single income per HH).... the % spent on housing is higher than it was ... that's what all the affordability studies refer to.

That's the problem, simpletons thinking that household incomes are a consistent measure over the past 50 years.

I think given potential FHBs are facing the same devaluation of their savings as retirees should the RBNZ throw both groups under the bus to protect speculators, you can reasonable expect every sympathy. Potential FHBs likely know they don't really benefit from a further cutting of rates.

I think both groups would actually be happy to see more reasonable interest rates rather than this OCR-driven kicking of the can down the road, avoiding of normal economy cycles rather than living with the risks ones has taken in investment.

Are you suggesting low interest rates have been good for FHB? Its just led to much longer mortgages with similar debt servicing costs. I wish this graph went back further.
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt
Once you have bought that's a completely different story. Then they benefit from lowering rates as far as possible so the next buyer of the house can afford to pay you a significant portion of the next 30+ years of their income.