Table below updated with Westpac's changes. It is further updated with BNZ's changes.
The first moves on term deposit rates following last week's +75 basis points Official Cash Rate hike are starting to come through, so it is timely to review where banks stand with these offers.
There have been increases from challenger banks recently, and now a main bank, ANZ has moved all their term deposit rates higher.
Currently, the highest rate offers are from Rabobank, who made their move a few days ago.
But the latest increase from ANZ certainly deserve respect too, and they are pitched sharply higher than any other rate offer from a main bank rival.
If ANZ becomes the benchmark, or even a floor, then overall term deposit rates will rise to be only +0.1% above the OCR rate for a 6 month term, and only 0.8% higher for a 1 year term. These are unusually low premiums. Over the past twelve months these premiums have been +0.6% and 1.2% respectively.
To restore those recent average premiums, you could expect the 6 month bank average rate to rise to 4.85% and the one year rate rise to 5.45%. That means there is still a long way for term deposit rates to rise yet.
If we step back a bit further and look at the premiums in place for the two years prior to the onset of the pandemic (so and average of 2018 and 2019) then they were +1.5% above the OCR levels for both a 6 and 12 month term. So you would expect 5.75% rate offers on that basis.
That is another +60 to +90 bps more than what is being offered now. And that is a lot.
Given the suppressing effect of the Funding for Lending Programme (FLP), perhaps you will be waiting a while. But the FLP ends next week, so that impact will fade.
And don't forget, this assessment of on the basis that the OCR is 4.25%. Economists expect to to be 5.00% by March 2023 and 5.75% by June 2023. Market pricing largely supports that. That is another +150 bps in 200 days - and the FLP will be well in the background then.
Those are all upside influences. Downside influences are dominated by expectations about the state of the global economy (not to mention the domestic economy). If central bankers really are ok with inducing a recession to head off inflation, perhaps there just won't be the economic activity around to support higher term deposit interest rates, no matter what the OCR is sitting at.
You are on your own trying to figure out what the future will really bring. Stay clear of any scribe who 'knows'.
An easy way to work out how much extra you can earn is to use our full function deposit calculator. We have included it at the foot of this article. That will not only give you an after-tax result, you can tweak it for the added benefits of Term PIEs as well. It is better you have that extra interest than the bank (and especially if you are in the 39% tax bracket - PIEs are taxes at 28% flat).
The latest headline rate offers are in this table after the recent increases.
| for a $25,000 deposit December 1, 2022 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 2.70 | 4.35 | 4.70 | 5.10 | 5.10 | 5.15 | 5.20 |
 |
AA- | 2.50 | 4.00 | 4.35 | 4.60 | 4.60 | 5.00 | 5.10 |
 |
AA- | 3.00 | 4.40 | 5.00 | 5.10 | 5.10 | 5.10 | 5.10 |
 |
A | 2.50 | 4.00 | 4.10 | 4.60 | 5.00 | 5.00 | |
 |
AA- | 3.00 | 4.35 | 4.60 | 5.10 | 5.10 | 5.20 | 5.20 |
| Other banks | ||||||||
| China Constr. Bank | A | 3.60 | 4.45 | 4.55 | 4.75 | 4.75 | 4.85 | 4.85 |
| Co-operative Bank | BBB | 2.30 | 4.05 | 4.10 | 4.75 | 4.85 | 5.05 | 5.05 |
| Heartland Bank | BBB | 2.80 | 4.30 | 4.45 | 5.00 | 5.00 | 5.00 | 5.00 |
| HSBC | AA- | 2.30 | 3.65 | 4.00 | 4.30 | 4.30 | 4.35 | |
| ICBC | A | 3.40 | 4.25 | 4.55 | 4.75 | 4.75 | 4.80 | 4.80 |
 |
A | 3.30 | 4.60 | 5.00 | 5.50 | 5.25 | 5.30 | 5.30 |
 |
BBB | 2.40 | 3.75 | 4.00 | 5.00 | 4.40 | 4.50 | 4.40 |
 |
A- | 2.50 | 3.75 | 4.10 | 5.00 | 5.00 | 5.00 | 5.00 |
Term deposit calculator
27 Comments
It would be helpful for investors to have additional deposit risk comparison tools. The standard financial rating agency scores don't tell the whole story. Credit rating agencies can provide more insight for example (% failure risk rating?).
I'm not sure what to expect in the medium term - RBNZ is looking for spending to 'slow down' but many mortgage holders will be cutting back already after this record run of rises in a short period of time. They're the ones who will shoulder the immediate brunt as they roll off fixed terms. A broader slowdown will require that drop-off in spending to have significant flow-on effects, like employment levels, and those won't be felt evenly either.
It makes me think that what the RBNZ is looking for is extremely close to the edge of a total drop-off in spending altogether. Seems like we're at serious risk of a controlled flight into terrain - how much 'pull up! pull up!' warning will we get before it's too late?
And in the midst of this, you have people trying to navigate homes for families, school zones, separations, relocations and all the other stuff that happens completely removed of investment, property trading or landbanking.
It makes me think that what the RBNZ is looking for is extremely close to the edge of a total drop-off in spending altogether. Seems like we're at serious risk of a controlled flight into terrain - how much 'pull up! pull up!' warning will we get before it's too late?
I think they know its dire and the "stop spending" speech is their way of saying the public's actions could have avoided things.
I think there is a lot of jawboning in recent RBNZ decisions and talk.
Yeah, this is all our fault. Power to the people!
You are on your own trying to figure out what the future will really bring. Stay clear of any scribe who 'knows'.
Very wise words.
I did a double take and had a 'Tui advert' moment at:
Economists expect to to be ...
Perhaps the stutter ("to to") was subliminal?
My term deposit money is long term money that's sitting there for the rest my life basically. Reality is I just "take em when I can" and have 15-20 percent of it coming off regularly enough not to miss out (up) or get stung (down).
My term deposit money is long term money that's sitting there for the rest my life basically. Reality is I just "take em when I can" and have 15-20 percent of it coming off regularly enough not to miss out (up) or get stung (down).
Unfortunately money sitting in TDs is losing its purchasing power. If you're OK with that, that's fine. Everybody's needs and situation are different.
But the current situation could easily flip to deflation due to debt defaults.
TD rates are still a dramatic improvement on where they were during the housing value climb and if the RB does hike more such incremental rises will likely continue. Likely many will be satisfied with the 12 month return offers but longer terms may appeal to those that see a pivot in the next 18 months. Further complicating such will be the need to draw down if the RE market does tumble significantly . The banks may not be so condescending in such an environment. One also ponders if the RB will hold at a default OCR setting if it can contain inflation as doing so would put it in a better position to manage future events. All in all savers should be happy that the sun is starting to shine albeit with inflationary forces present. Situation much improved on recent years for those saving for a rainy day.
Are you suggesting that if the RE market tumbles significantly the banks will be under pressure to give depositors much higher offers ?
Not at all, I am suggesting the banks may not be so kindly with those that seek to break their deposit term .
IF the housing market has a serious fall and breaks a hip, at its considerable age, the international agencies will all downgrade NZ and NZ banks, funding costs will increase. You may see TD go up in this environment or the FLP may need a round 2.
I beleive that after a hip break, the average survival rate is 18 months. Something else to worry about at old age.
Yes the 1 to 2 yr TDs look certain to go to at least 5.5. The 4 and 5 year are difficult to predict, the curve will likely invert. All comes down to the wage/inflation spiral. Most honest comment ive heard recently, Patrick Smellie on the weekend, "no one knows"
How things have changed! What could it mean? Probably that the RBNZ has a long, long way to go to rebalance our economy, because it's unlikely any of our future elected Leaders will tackle the job
December 1992 - CPI was up 0.3% for the 1/4 to......1%
- 6 Months average T/D .................6.5%
- Average Floating Mortgage rate...8.9%
December 2022 - CPI was up....................................7.2%.
- 6 Months average T/D ..................4.5%
- Average Floating Mortgage rate...7.25%
(NB: Why '92? Because it looks like that's about when it all started to go wrong.)
Pretty trite analysis really. The world is very different from what it was in 1992. For example the internet exists now. And you know, everything else that has happened since then, like globalisation and China becoming the world's factory.
Undoubtedly. And I'd call it an Observation, rather than an Analysis. Just semantics, I guess.
But even the brightest amongst us appear to be seeing the light; that we are in for a significant change in our thinking?
"Think mortgage rates are high now? Economist Tony Alexander warns of 9.5% peak"
Perhaps he, too, is now beginning to accept that the RBNZ is both serious and has a lot more work to do.
I cannot wait for a June 2023 One Roof radio show where they have the two clowns together, and they have to sit there and discuss the fact that NZ property is below the pre covid high water market and still falling.
Bank Risk? The rear view mirror on bank metrics has just (28th Nov) been updated for September quarter https://bankdashboard.rbnz.govt.nz/summary . Two months old and through a glass darkly for many folk but interesting to look at % housing loan exposure and % non performing loans across the board.
Why the big drop for Westpac? Did they drop capital, or extend many loans?
At 5% compound interest your money will double in 14.4 years? No need to buy two houses anymore.
we've been sitting on 300k+ since early last year. Was disappointed we couldn't afford a house last year. We've now moved to Aussie but the money is still in NZ, do i want to lock in 5.5% for a year while house price tumbles? The tax kills it but then it's currently earning next to nothing. Decision decision !
You could put it somewhere safe like BTC. I am told it is much safer than fiat.
All bank snouts to the FLP trough next week then, may as well clear it out right? Why pay people to save when you can get it cheaper directly from the government.
Isn't FLP supposed to be ending next week?
Will have to look to see if a Pie TD will return more than what I'm saving in mortgage interest by offsetting. TD rate is higher, but interest on the income has to be taken into account. Where's my abacus?
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