ANZ's response to Thursday's OCR cut is throwing the spotlight back on term deposits.
Both Westpac and ASB have adopted the ANZ position of giving only minor pass-through benefits to floating rate home loans, but offering good increases on selected term deposit terms.
BNZ has followed, increasing its 18 month TD offer by +30 bps to 3.60%. Kiwibank has focused all its OCR reaction on the floating mortgage rate.
Term deposit savers have actually held on to some of the benefits since the RBNZ's policy rate reductions started in June 2015. Over that period, the OCR has been reduced from 3.25% to 2.00%, a decline of -1.25%.
But over that same time, the one year term deposit rate has moved from 4.25% (bank average) to 3.30%, a fall of only -0.95%.
If this weeks rises hold and more institutions start competing for deposits, more of this fall could be clawed back.
Here are the latest changes announced:
| Bank/Term | Previous rate | change | New rate |
| % | % | % | |
| ANZ: | |||
| 150 days (5 mths) | 3.00 | +0.25 | 3.25 |
| 270 days (9 mths) | 3.50 | special extended |
3.50 |
| 18 months | 3.30 | +0.30 | 3.60 |
| ASB: | |||
| 18 months | 3.20 | +0.45 | 3.65 |
| BNZ: | |||
| 18 months | 3.30 | +0.30 | 3.60 |
| Westpac: | |||
| 180 days (6 mths) | 3.00 | +0.50 | 3.50 |
Only time will tell how long these banks hold these higher term deposits. This same strategy has been used in Australia and the experience there has been that these benefits get withdrawn in a few months, even though the mortgage holdback is retained.
And it is worth noting that equity analysts applaud this kind of strategy because it improves bank margins (at the expense of customers).
There is no evidence yet that these banks will withdraw the rate improvement on this side of the ditch, but the Australian evidence is worth taking note of.
Use our deposit calculator to figure exactly how much benefit each option is worth; you can assess the value of more or less frequent interest payment terms, and the PIE products, comparing two situations side by side.
All carded, or advertised, term deposit rates for all institutions for terms less than one year are here, and for terms one-to-five years are here.
The latest headline rate offers are in this table. (now updated with new UDC rates)
| for a $25,000 deposit | Rating | 6 mths | 1 yr | 18 mths | 2 yrs | 3 yrs | 5 yrs |
 |
AA- | 3.15 | 3.25 | 3.60 | 3.35 | 3.40 | 3.60 |
 |
AA- | 3.20 | 3.20 | 3.65 | 3.25 | 3.35 | 3.55 |
 |
AA- | 3.15 | 3.25 | 3.60 | 3.35 | 3.40 | 3.60 |
| Kiwibank | A+ | 3.15 | 3.20 | 3.15 | 3.20 | 3.10 | |
 |
AA- | 3.50 | 3.20 | 3.20 | 3.25 | 3.30 | 3.40 |
 |
BBB- | 3.10 | 3.15 | 3.25 | 3.30 | 3.35 | |
 |
BBB | 3.30 | 3.40 | 3.40 | 3.60 | 3.70 | 3.80 |
| HSBC Premier | AA- | 2.80 | 2.90 | 2.90 | 2.95 | 3.05 | |
 |
A | 3.30 | 3.40 | 3.40 | 3.45 | 3.55 | 3.80 |
| SBS Bank | BBB | 3.30 | 3.25 | 3.30 | 3.35 | 3.40 | |
 |
A- | 3.00 | 3.10 | 3.25 | 3.30 | 3.50 | 3.70 |
| UDC | AA- | 3.25 | 3.55 | 3.65 | 3.30 | 3.30 | 3.40 |
Our unique term deposit calculator can help quantify what each offer will net you.
Term deposit rates
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12 Comments
Not really that surprising given you get next to no interest, the banks are looking a bit less secure in light of their exposure to the farming and domestic property markets; OBR provisions and a total lack of commitment by the government and Reserve Bank to bank security.
As outlined in David Chaston's recent article http://www.interest.co.nz/opinion/82972/david-chaston-says-regulation-b…
the NZ authorities are doing nothing while the capital adequacy ratios of our banks slip and their Australian owners strip out cash from them to bolster the capital ratios of their Australian parents as required by the Australian authorities. While this is occurring we are now starting to see a decrease in NZ deposits which is prompting the deposit rates to rise at the same time that loan rates drop. Margins are being squeezed which will further undermine the banks capital reserves with the possibility that the whole process will feed on it's self. Could this be the beginnings of a bank run?
I have been saying for a few days now that our Reserve Bank or Government need to firmly enforce tighter capital ratios in our present conditions.
Kitchen ATM abuse, particularly in the Auckland valuation "sweet spots" is the accident waiting to be reported publicly. Ongoing record vehicle sales are a symptom.
The US is already feeling the agony of misspent debt accumulation.
More homeowners are missing payments on their home-equity lines of credit, or Helocs, a type of loan that allows borrowers to withdraw cash from their house to pay for renovations, college tuition or almost any other expense. These loans typically require interest-only payments for the first 10 years, but then principal payments kick in for the next 15 or 20 years. Read more
Due to the stresses involved in a destructive work environment which suffers from Group Think mentality, I took redundancy.
Currently living on this sum.....frugal living is ingrained from my upbringing so I will survive till retirement age, but other savings are to be guarded at all costs, literally.
Low TD rates and the disgusting OBR rules re deposits are at the point where return OF capital is fast becoming a priority over ON capital. I too am slowly withdrawing my money as TDs fall due.
A bird in the hand etc, etc......(albeit of diminishing paper value).
Just wait to the old codgers realise their term deposits are worth zip now as income sources. In a way, anybody who saves or has saved has just become a victim to the housing market in a reverse kinda way - your money is not working (add in gst raises over the years - which just steals your savings). What im saying is the "savers" are a silent victim/casualty unlike the first home buyers.
Just wait to the old codgers realise their term deposits are worth zip now as income sources.
They and others are completely aware of what wealth is being transferred out of their accounts and pockets by official state sanction.
Of course, there is a much more pragmatic answer, and one which Wheeler did stumble on last night when he said that no matter what he does "the market would still want more." That is precisely what has happened with Australia, New Zealand, Japan and so on: the market still wants more. Much more.
In fact, the market wants central banks to go one step beyond and instead of just monetizing government and corporate bonds, it is now demanding that everyone join the BOJ and the SNB in buying up ETFs and single stocks, in the process sending the equity market to unprecedented levels. It is then, when central banks have bought up all the world's stocks and bonds, and transferred all the wealth into the pockets of the 1%, that the confusion will finally end. Read more
The NZ Herald is spruiking a "deposit rate war" headline. Really? at rates below 4%? They have to be joking.
Banks need deposits to help fund their lending and in recent times lending growth has been far exceeding retail deposits on the back on New Zealand's booming property market.
Where do certain academics and reporters get inculcated with these impossible untruths? New Zealand as a nation is interminably indebted - witness the 40 year current account deficit - saving is completely off the agenda. How does mum and dad magically create savings? They don't.
One more time:
In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money. Read more
The only reason banks engage off-balance sheet cross currency basis swapped foreign wholesale funding (beyond OBR) is to avoid the need for the banks' owners to stump up more capital to expand the already risky asset ledger.
If loan (asset) growth is leaping ahead as the pundits claim there must be equal and opposite bank liability creation.
"Where do certain commentors get inculcated with these impossible untruths?" Retail Banks still need to borrow to fund asset growth - borrowing from depositors, wholesale markets or shareholders... it's all borrowing. That's the equal and opposite liability. Throw into the mix regulation about capital adequacy, liquidity and funding sources etc.
PR stunt
Would like to know how much interest they save when you add up interest recieved on debt less interest paid to depositors
So the reduction in interest received is probably huge compared to the extra paying to depositors.
I bet they are winning by a mile. GREED
Seeing as they have gone against the government wishes let's hope it means quicker Debt to Income and a stamp duty. They have a large amount of housing in Auckland exposure so must be getting nervous.
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