Finance companies raise term deposit rates as competition for funds returns

PSIS, Southern Cross Building Society and NZF, along with other institutions, this morning raised a number of term deposit rates. The moves come after a quiet couple of weeks in the deposit rate market, and indicate renewed competition for funds between institutions. See and compare all deposit rates for terms less than one year here, and for terms one year and greater here. New prudential liquidity guidelines from the Reserve Bank of New Zealand in June increased competition between banks in New Zealand to attract more local funding through term deposits, putting upward pressure on deposit rates. This in turn put pressure on smaller financial institutions, many of which are seeking funds that mature after October 2010, when the current government guarantee expires. PSIS swapped its special term deposit offer from five months (was 4.75%) to six months at 4.8%. Meanwhile, Southern Cross raised both its six and nine month term deposit rates by 20 bps to 5%; and its one and two year deposit rates by 20 bps to 5.2%. NZF made a number of changes to its six month through three year deposit rates. For depoits over NZ$10,000, notable moves were its six month rate up 40 bps to 5%; and the introduction of an 18 month special at 7.5%. Other finance companies that made changes to deposits rates are Equitable, which raised its six month rate 100 bps to 5.5%, Fisher & Paykel Finance, HBS Building Society, Credit Union North, Nelson Building Society and Presbyterian Savings.