Term deposit offers sink

Personal Finance

A downbeat economic outlook is seeing more banks cut their term deposit offers and the trend is probably only just starting

12th Mar 20, 10:46am by David Chaston

In a world of falling interest rates, it will come as no surprise that term deposit offers are falling as well.

But the reductions aren't all simultaneous, and variations are opening up between some institutions.

Among the main banks, ANZ is now offering the highest rates across most terms although Kiwibank's 2.80% rate for six months is a standout in this group.

Among the challenger banks, rates from ICBC are generally the highest.

But among non-Chinese banks, rates from Heartland Bank top most offers.

The bank with the lowest term deposit offers is HSBC.

Readers should be aware that all rates are under pressure, especially from falling mortgage rate offers. Wholesale rates are very low as well, but the immediate pressure on banks is what they need to offer loan customers to remain competitive. Don't expect those banks with TD rates higher than others to maintain that premium for very long. There is no indication on the horizon that we will see upward pressure on term deposit and other savings rates any time soon.

And when deposit guarantees are instituted (it is Government policy to bring them in, even at a modest level) that will put further downward pressure on TD offer rates. Even though the highest rates seem to be at the short term 6-9 month band, in a short time, even those 2.50% long term rates might look very attractive in hindsight.

The updated rates in the table below are the highest offered by each institution for the terms listed. You will, however, 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. (The codes are explained here).

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 and marking up changes this week.

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-	2.25	2.65	2.65	2.70	2.60	2.60	2.60
	AA-	2.00	2.50	2.65	2.50	2.40	2.40	2.40
	AA-	2.10	2.60	2.55	2.40	2.40	2.40	2.40
Kiwibank	A	2.25	2.80	2.65	2.60		2.50	2.50
	AA-	2.25	2.55	2.65	2.50	2.50	2.50	2.50
Other banks
Co-operative Bank	BBB	2.05	2.60	2.60	2.70	2.50	2.50	2.50
	BBB	2.25	2.80	2.80	2.75	2.70	2.70	2.70
HSBC Premier	AA-	1.70	1.90	1.85	1.85		1.85	1.85
ICBC	A	2.45	2.80	2.80	2.80	2.80	2.80	2.80
	A	2.05	2.70	2.65	2.55	2.50	2.50	2.50
	BBB	2.25	2.65	2.65	2.60	2.50	2.50	2.50
	A-	2.25	2.55	2.65	2.60	2.60	2.60	2.60

* = 15 months

Term deposit rates

Select chart tabs

Source: interest.co.nz

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33 Comments

by Foxglove. | 12th Mar 20, 11:29am 1583965772

Tks David, a reality check indeed. One wonders though about the negative affect on retirees. That is those that have been ticking along nice and independently, but their budget reliant on income from their savings. Spending that capital to bridge the gap is of course one option but more likely in the first instance, costs will simply be cut. It would be interesting to learn if there has been an increase in the cancellation of health insurance by those in this senior age group. If so that plus reduced diet, heating, doctors visits etc at an age and stage of life where one becomes more and more vulnerable, could well impact markedly on our public health system, already said to be pressured.

by printer8 | 12th Mar 20, 11:54am 1583967285

Agree with your sentiments Foxglove, and if you are not a boomer yourself great to see the situation of retirees being considered.
However a few points:
- "Spending that capital to bridge the gap is of course one option" - for some that was probably always the part of the plan anyway. There are calculators that have been around for some time that looked at returns (considerably higher than currently) and how one's capital could be whittled away over time.
- health insurance for many of older folks who have had it for many years have found that increasingly became unaffordable with premium increases with age.
Discussion at my Friday night drinking group (all late-sixties plus and just average guys) is that most just see falling interest rates and current share market situation as part of life and will adjust accordingly. All own our own homes without a mortgage so the bottom line is that superannuation payments provide a basic living wage, and any additional income was about additional quality of life and choices.
Home ownership without a mortgage provides a great sense of financial and intrinsic security; for those retirees without their own home it was always very, very tough and have been existing without too many choices in life. It is one of the reasons I advocate for FHB.

by Andrewj | 12th Mar 20, 12:04pm 1583967844

Im expecting treasuries to go negative, deflation will reward savers even with low interest rates. Interest rates are low because it's all people can afford to pay.

by SmoKey | 12th Mar 20, 3:57pm 1583981840

The Aussies have announced handouts of $750 to retirees, beneficiaries, etc. NZ may follow ?

by Nzdan | 13th Mar 20, 7:00am 1584036014

Sounds good to me, give the beneficiaries $750 so they can sit at home and booze it up while the rest of us go to work to pay for that privilege.

by fortunr | 16th Mar 20, 3:06pm 1584324414

Lol. Very well stated.

by ngakonui gold | 12th Mar 20, 11:31am 1583965883

Plenty of well priced shares on the nzx at the moment imo.
Follow Buffetts advice and''' stay the course''.

by loveyourwork | 12th Mar 20, 11:36am 1583966209

Where are you looking to Ngakonui?

by ngakonui gold | 12th Mar 20, 2:43pm 1583977437

Looking at the banks when they get to a certain threshold.
Also looking at CDI,land always needed for housing and they have land in nice areas,although price will need to fall a wee bit more.
IKE pretty dependant on the USA so if you can hang tough rewards might come later.
jmo no expert.

by davef | 12th Mar 20, 11:48am 1583966909

Agree though patience will probably see even better bargains for those not already in. Once Tiwai point is sorted (either way) the power companies should be good long term holds, REITs should be ok with rates low for a lifetime now (unless the virus causes companies to decide they don't need office space and can telework).

by Jock Silver | 12th Mar 20, 2:38pm 1583977093

> Follow Buffetts advice and''' stay the course''

I thought that was Jack Bogle?

by PonziKiwi | 12th Mar 20, 11:35am 1583966118

Gosh this is scary. Banks need term deposits from mum and dad investors which are then used to lend out to people wanting to buy a home or start a business. Without these term deposits to which money is sourced and then lent out it could mean a bumpy ride ahead.

People may choose to take their currency out of the bank...errr

by bw | 12th Mar 20, 11:57am 1583967477

Banks don't need Term Deposits 'to lend out', as such:
Banks create around 80% of money in the economy as electronic deposits
https://tinyurl.com/yx5o68yh

by PonziKiwi | 12th Mar 20, 12:03pm 1583967792

Incorrect

Dave has debunked this on several occasions.

People who suggest banks create money out of thin air like oxford university professor richard werner.

by J.C. | 12th Mar 20, 3:11pm 1583979090

People who suggest banks create money out of thin air like oxford university professor richard werner.

And the ex-Governor of the Bank of England Mervyn King. If "Dave" means David Chaston, I would like to see him debate Mervyn King.

by Audaxes | 12th Mar 20, 6:50pm 1583992235

Publish the evidence?

by printer8 | 12th Mar 20, 12:09pm 1583968194

Ponzi
You seem to have often ridiculed support for property.
With falling interest rates a year ago my wife withdrew a considerable sum from term deposits and purchased a rental property. This is a low maintenance (both in terms of the property itself and the type of tenant it would attract) investment property which is providing a yield of around 5% after all outgoings. She is relaxed about this, and if there is a short term downturn in the market, that is totally irrelevant as she will still have the same house, same return on initial investment, and as it is longer term (meeting the requirements of the bright line test) is likely to see capital gains in the longer term.
Besides falling TD interest rates, there only concern for other investors our age is the share market which is proving - as in the past - to be a hell of lot more volatile and tanking.
So despite your concerns regarding property - property is still looking pretty good and those who either own their own homes or have investment properties will just ride out the current turbulence no matter what the property market does in the short to medium term.

by PonziKiwi | 12th Mar 20, 12:21pm 1583968874

If no properties are purchased or sold in the next few months what happens to the currency supply?

Cheers

by printer8 | 12th Mar 20, 12:52pm 1583970778

Ponzi
Only one implication of "if no properties purchased or sold in the next few months"; tenants continue to pay-off their landlord's mortgage for him/her. Who is upset? :)

by PonziKiwi | 12th Mar 20, 1:38pm 1583973485

Printer 8

Sorry you clearly do not understand credit creation. Money only enters the economy when someone takes out a loan. If people pay down debt then de-leverging occurs. That will cause a retraction in the currency supply leading to a 2008 style recession.

Likewise if we all saved our currency it would also lead to recession, That is how our debt based system works. If property collapses or none are being sold then we all lose our jobs and our savings in the banks become debased and devalued.

All currency is backed by securities when banks create a deposit backed by the property. People use leverage to buy more properties or start a business or consume. If values decline then the currency backed by the asset becomes debased.

The system requires constant debt and credit to survive. That is why immigration is off the chart.

Housing is not a law of economics supply and demand situation like apples and beer.

by printer8 | 12th Mar 20, 2:17pm 1583975824

Ponzi
:)

by J.C. | 12th Mar 20, 3:14pm 1583979286

Sorry you clearly do not understand credit creation.

Good post. Your explanation was succinct and accurate.

by RickStrauss | 12th Mar 20, 3:42pm 1583980932

I.e. we have had housing as governments' economic plan, and precious little else. A failure of governance over the last 20+ years.

by Rob | 12th Mar 20, 5:58pm 1583989109

Except what happens when people lose their jobs due to the virus and the downturn in business, and can't afford to pay the rent?Dealing with tenants who can't afford to pay I can see being a problem.

by Keen Observer | 12th Mar 20, 8:54pm 1583999688

Hope the advise goes to the highly leveraged loan borrower ;-) when you're super sick, you still need other people to attend you.. not your house.. just always make sure to present yourself as poor demographics, don't flaunt your wealth in front of those poor healthcare professionals.

by streetwise | 12th Mar 20, 12:29pm 1583969366

Now might be a good time to start doing some hard negotiating on the likes of the exorbitant prices charged by some tradesmen and professionals; I have kitchen/bathroom renovators and dentists in particular in mind.
Also the sloppy customer service in the big Australian retail chains (including the big banks) needs to greatly improve; and asserting your rights more forcefully under the consumer rights act on crappy products.
In the coming months you need to get onto the front foot and assert your rights.
The Government and the RBNZ need to start planning to nationalize any bank that falters.

by Foxglove. | 12th Mar 20, 1:13pm 1583972013

Suggest their is a huge question mark over the ethical behaviour of the large proportion of our builders and subcontractors. As well the chums club that exists in the trade between them and the suppliers. Even when a glaring mistake has been made in a process and/or product’s use, it seems more likely the supplier will back the builder and not the party paying for the work.

by Wrong John | 12th Mar 20, 4:41pm 1583984502

Don't worry lads (lassies) it'll go up again tomorrow.

by Audaxes | 12th Mar 20, 7:24pm 1583994243

In a world of falling interest rates, it will come as no surprise that term deposit offers are falling as well.

It might surprise some that if ANZ's share price keeps falling at the current rate of decline it will have no choice but to pay more to the so called "sticky" depositors, because their current credit rating will be downgraded. ANZ is not issuing sovereign debt with the full faith and credit of the government.

In reality they are offering the credit worthiness of the purchased borrower's IOUs in the form of an unsecured pass through bank IOU to the depositors with no more capital skin in the game than $8 for every $100 dollars of debt recorded.

by lastlegs | 12th Mar 20, 7:07pm 1583993269

wonder if it will change savers behaviour?i used to ladder 5 year term deposits every year but stopped when returns dropped below 4 %,you get more for short term than long term so roll it over 90 days,on call savings accts pay next to nothing or have lots of conditions on them so now the best on call is cash in your wallet,dont use the credit card except for online purchases.

by Audaxes | 12th Mar 20, 7:22pm 1583994142

Unfortunately, there are very small amounts of cash available from banks for the whole population to participate, compared to total bank assets (other's debt) on issue.

by Keen Observer | 12th Mar 20, 8:48pm 1583999297

Just take it out folks! & put it on average 5-6% in govt guaranteed, visit Bali while enjoying holiday open up your deposit there, it's much robust productivity labour based economy rather than here, if you scare stiff? - then choose the OZ or Yankee overlord banks there... heaps of them there, for a reason.

by i am not a nimby | 12th Mar 20, 9:18pm 1584001126

dont be fooled by Heartlands offer.. the sort of clients Heartland is seeking out to give loans to are the ones with minutely small risk profile whom asb, anz or westpac would likely lend at 1.99%