ANZ has raised term deposit rates just a day after raising mortgage rates in their latest round.
The ANZ changes range from +10 bps to +40 bps.
A feature of their change is that they are now offering 3.00% pa for fixed terms of 3, 4 and 5 years. That 3% for three years is the first time in this cycle that any bank has a rate that high for that term. Their main rivals only have a 3% offer for five years.
The highest rate offer for any term to four months is from Heartland Bank at 1.25% pa. They also have the highest offer for terms 5/6/7 months at 1.65% at six months.
For a term of 8/9/10 or 11 months, the highest offer is from Rabobank at 1.70% for 9 months.
For a one year term, the highest current offer is from ICBC at 2.05%.
For eighteen months, both Rabobank and ICBC offer 2.20%. For two years, both Rabobank and SBS Bank offer 2.55%.
Rising term deposit rates are being more than matched with rising mortgage rates.
For ANZ, as the largest bank, the difference between their carded one year home loan rate of 4.25% and today's one year term deposit rate of 2.00% is 225bps. That is an unusually high differential. We have a record that goes back to 2002 and the average differential over all banks only ever once matched that, in January 2009, as banks started cutting term deposit rates in a hurry as the GFC started to bite. Over that whole 18 year period, the average difference between the one year mortgage rate and the one year term deposit rate (for all banks) is only 1.25%
Savers have been avoiding term deposits, and let their balances atrophy over the past 26 months. But they haven't stopped saving, they have just held these funds in at-call transaction accounts.
Term deposit balances have reduced by $20 billion from $101 bln in February 2020, pre-pandemic, to $81 bln by the end of August this year.
Meanwhile, all other household bank balances have risen over the same time by +$43 bln to $126 bln.
Even though today's term deposit rate increases are 'substantial' from a bank's point of view and are up +10 to +40 bps, it seems very unlikely that the resulting offers are still anything near enough to entice more savers to fix their holding in a term deposit in the terms they usually want.
But a growing deposit base does allow a bank to grow lending. But it gets fierce if their deposit base starts to fall - not only can't they grow their lending, they might have to shrink it. This is a special risk for banks that don't wholesale fund much, and that applies to most New Zealand-owned challenger banks. An aggressive term deposit marketing push by big banks might have an outsized consequential impact on challenger banks.
With inflation running at 4.9%, savers do have a problem. Leaving funds at a zero return will leave them in a much worse position after inflation, than getting some return to mitigate some of the inflation problem. But that return will have to be after tax and after inflation - and negative. It will just be less negative in a term deposit account.
One easy way to work out how much extra you can earn by switching 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.
The latest headline rate offers are in this table with the markings for changes this week so far.
for a $25,000 deposit | Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
Main banks | ||||||||
ANZ | AA- | 1.00 | 1.50 | 1.60 | 2.00 +0.15 |
2.10 +0.10 |
2.50 +0.20 |
3.00 +0.40 |
AA- | 0.90 | 1.30 | 1.45 | 1.65 | 2.00 | 2.25 | 2.60 | |
AA- | 0.95 | 1.40 | 1.60 | 2.00 | 2.10 | 2.30 | 2.60 | |
Kiwibank | A | 1.20 | 1.50 | 1.55 | 2.00 | 2.50 | 2.75 | |
AA- | 1.00 | 1.40 | 1.60 | 2.00 | 2.00 | 2.30 | 2.60 | |
Other banks | ||||||||
Co-operative Bank | BBB | 0.60 | 1.40 | 1.60 | 2.00 | 2.10 | 2.50 | 2.75 |
BBB | 1.25 | 1.65 | 1.50 | 1.85 | 2.00 | 2.15 | 2.20 | |
ICBC | A | 1.00 | 1.55 | 1.65 | 2.05 | 2.20 | 2.50 | 2.75 |
A | 0.65 | 1.60 | 1.70 | 2.10 | 2.20 | 2.55 | 2.75 | |
BBB | 0.69 | 1.45 | 1.60 | 2.00 | 2.05 | 2.55 | 2.80 | |
A- | 0.95 | 1.40 | 1.55 | 1.85 | 2.00 | 2.30 | 2.60 |
Term deposit rates
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23 Comments
Don't save the money. It's useless. Just buy houses. That's the only way to be a millionaire in NZ. Just have a look at politicians portfolios. All of them have money in the houses. They will not let it go down. They own you guys, the poor litte kiwi public. So just buy houses from each other and get the house market to new highs. Do it quick. I want to make my millions
Oh...like National at the moment?
TOP's tax and immigration policy's are a bit revolutionary compared to the rest, but they by far make the most sense for anyone working in this country under the age of 35. And anyone else not stupidly leveraged on property. Promote actually working (less tax), and stop favouring debt speculation (universal land tax). Almost sounds too simple when put like that don't you think?
Last month UDC offered 0.9%pa over 36 months on Kubota machinery (and possibly other brands). I snapped up a mini excavator, at that rate why bother with banks? I could have paid cash, but it works out at less than $800 in fees and interest, and the way things are going it won't be long until that cash will make more just sitting in a call account, let alone a TD.
No wonder the country is in hock up to its eyeballs right now. I had to talk my wife down from ticking up a ute as well.
UDC isn't a charity. That 0.9% "rate" would have been done in partnership with Kubota. Kubota would have capitalised most of the commercial interest into the purchase price, and paid that to UDC. I am guessing here, but the "0.9% you paid would just have been UDC's fee. It's an old promotional tool, usually seen in Harvey Norman's "interest free" deals - usually done with Latitude or Finance Now, or the like. The hidden interest isn't any less than normal, its just in the price you pay for the product you buy.
Well aware of that, yes, perhaps I need to wedge my tongue further into my cheek next time for greater effect. I did buy a digger though...
Who was it that used to have the "It's the putting right that counts" slogan? LV Martin, I think. Back in the day they'd advertise a cash price and a credit price so it was easier to spot the mark-ups, but I can't remember whether such practices were legislated out of existence by the government or bullsharted out of existence by the retailers.
You miss the point. Banks didn't take the risk in the first place. They hedged it via the swap market. The won't mind you staying with your existing rate but they have no need to pay you to cancel it. You can of course, for little but the admin fee for doing so when the market is rising. Then when you sign up to a higher rate now, they won't take the risk on that either. They will hedge it too via the same moneymarkets. Any financial institution that doesn't hedge, risks insolvency. They know they can't foretell the future and they would be grossly negligent to hold unhedged positions. None of them do that.
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