ANZ offers 3% pa for a three year term deposit term, the first time in this cycle a 3% offer for three years has appeared. But banks are raising term deposit rates slower than mortgage rates, and the difference is the widest on record

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