A the end of August, Kiwibank became the first main bank to offer a 6% pa term deposit rate for a one year term. Other main banks quickly fell into line and now all main banks offer that for either 12 or 18 months. Of course, the main banks all followed challenger banks who got there much earlier.
Now, also following challenger banks, Westpac has become the first main bank to offer 6% for a term less than one year. For nine months, in fact.
There hasn't been a main bank rate this high for a nine month term for 15 years.
This may an even more important shift than the one year breach. And that is because savers prefer terms less than 1 year.
RBNZ data (L3) shows that 31% of all TD investments are for a fixed term of "> 6 months & <= 1 year", 32.6% is "> 3 months & <= 6 months", and 29.7% is "> 1 month & <= 3 months". So, from 1 month to 1 year terms, that accounts for a dominant 93% of all TD investment, with 62% of it 6 months or shorter.
In a data series that goes bank to 2011, savers have gradually lengthen their terms. The 6-12 month term bucket has gone from under 20% of all TD savings to now over 30% share, while the 1-3 month share has gone from almost 40% share to under 30% now. The proportion in 3-6 month TDs is little-changed.
Six percent rates for less than a year brings into play the $54 bln of TD savings in the 3-6 month category, the biggest single category. Yes, Westpac's offer is for a 9 month term, but you can be sure those with savings in the six month range will be tempted to get what they wouldn't do for 12 months. The banks are coming for them, rather than the other way around.
Also in play are increasing amounts of KiwiSaver withdrawals. No matter where they are moved from, they become attractive as a way to establish a relationship with customers of other banks.
And with Westpac in the market with a 6% carded rate for a nine month term, the other big banks will be open to negotiation and possible matching.
Update: Kiwibank has raised term deposit rates too, taking their headline one year rate offer to 6.05% and the highest of the main banks for that term. (They also raised home loan rates.)
This is good news for savers, but borrowers will be squirming. As the 6% benchmark moves to ever shorter terms they is no way banks can keep their fixed term home loan rates unchanged. The pressure will be on to raise those too.
Savers and borrowers alike should remember you can negotiate with any bank over their carded rate offers. You won't get a better rate if you don't ask. Whether a better rate is offered to you is up to the bank, and their perceptions of you, your financial situation and how important they feel it is to gain or retain your business. Many bank officers have some minor discretion on rates.
One risk savers should watch is the cost of wholesale money and you can do that by looking at swap rates. You can do that here. Wholesale swap rates jumped recently, and we detailed those shifts here.
An easy way to work out how much extra you can earn 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, especially if you are in the 39% tax bracket - PIEs are taxed at 28% flat.
* Kookmin Bank's 6.10% one year offer is for deposits of $100,000 and more. For a $10,000 minimum it is 6.00%.
The latest headline rate offers are in this table after the recent increases.
| for a $25,000 deposit September 25, 2023 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 4.30 | 5.85 | 5.85 | 6.00 | 6.00 | 5.70 | 5.25 |
 |
AA- | 4.20 | 5.85 | 5.85 | 6.00 | 6.00 | 5.90 | 5.80 |
 |
AA- | 4.30 | 5.85 | 5.85 | 6.00 | 5.90 | 5.70 | 5.25 |
 |
A | 4.40 +0.20 |
5.90 +0.05 |
5.90 +0.05 |
6.05 +0.05 |
5.70 | 5.20 | |
 |
AA- | 4.30 | 5.80 | 6.00 +0.15 |
5.90 -0.05 |
5.80 | 6.00 | 5.50 |
| Other banks | ||||||||
| Bank of China | A | 5.00 | 5.90 | 6.00 | 6.10 | 6.10 | 6.00 | 5.60 |
| China Constr. Bank | A | 5.00 | 5.90 | 6.00 | 6.10 | 6.00 | 5.80 | 5.50 |
| Co-operative Bank | BBB | 4.20 | 5.85 | 5.90 | 6.00 | 6.00 | 5.90 | 5.60 |
| Heartland Bank | BBB | 5.50 | 5.90 | 6.00 | 6.10 | 5.90 | 5.90 | 5.85 |
| ICBC | A | 4.80 | 5.90 | 6.00 | 6.05 | 5.85 | 5.55 | 5.40 |
| Kookmin Bank | A | 4.40 | 5.60 | 5.70 | 6.00* | 5.20 | 5.20 | |
 |
A | 5.05 | 6.00 | 6.05 | 6.25 | 6.05 | 6.00 | 5.70 |
 |
BBB | 4.20 | 5.85 | 5.70 | 6.00 | 5.35 | 5.35 | 5.35 |
 |
A- | 4.25 | 5.75 | 5.80 | 6.00 | 6.00 | 5.70 | 5.50 |
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25 Comments
6% interest term deposits bring back memories of 2007. It got as high as 8%, paid monthly. Ah, the good ol' days before disaster struck.
You wouldn't catch me giving my money to them this late in the piece as I'm not sure even 50% at the end of term would compensate the risk of never seeing it again. Remember, your bank's "terms and conditions" (that you never read) say that you have done your due diligence and have "invested" with the bank. You are an unsecured creditor. Remember, the problem caused by the 2008 GFC was never fixed - it's just a multitude of proportions worse now.
I remember when the online call rates were higher than the term deposits and they were around 8%, not much less than what fiance companies were offering before many failed. Raboplus offered some great rates when they first started their online savings accounts. But todays online savings rates are pretty poor from most of the banks.
Wow thats crazy the amount of people that go for short term TD's!
That seems totally illogical to me, when it is super easy to just open a Heartland or Rabo Bank account where you can get 4.6% or 5.25% respectively while your money is on call.
Higher rates (than most of the 5 month terms) and better optionality! Also monthly compounding rather than at maturity.
Just goes to show how either lazy or untrusting Kiwis are.
Must be time for a good property news story from TA.
What I don't understand is why anyone would have an investment property right now when you can get 6% from the bank with no effort. I guess when National reinstate the tax perks property may just work out better than TD, and I also suspect those investors assume capital gains will return.
Our media is so lazy. I haven't heard anyone ask Luxon why so many property "gurus" think prices will go up again under National, and whether National want prices to go up. We know National want to kill more people on the road, but we don't know if they want house prices to go up or down.
Agreed that it is a better investment currently, especially with the rule changed labor pushed through. But Property isnt liquid, so you cant just chop and change from property to TD.
Also Tax implications to consider.
And when the next cycle comes around, you will be buying into the hype again, rather than scooping up some assets at the lows, managing the negative cash flow in the short term, and coming out ahead in the long term.
Fiat currency only ever goes down in value, ergo assets priced in fiat will go up in the long term.
A big sell off once the brightline is reduced?
One thing that is never discussed about the brightline change is that it allows people to keep their property portfolio loaded with debt to minimise tax. If the bank wont give you interest only and you have to begrudgingly pay some equity and some tax, you can sell and buy a new fully loaded property if there is no brighline. No property investor wants their business to make a profit!
If Brightline is once again reduced to two years, are they backdating for those who bought & fell under the 5 or 10-year timeframe?
It might be that those that buy say from 01-April 2024 are under Nationals restored 2-year Brightline.
There might not be a selloff.
Or the rental flows pay for the land over the mortgage period and you win from land price appreciation due to background inflation, even in the 2-3% band its a great return on the 15-20% of the purchase price you have to use as a deposit. Then you develop of sell the land to a developer.... What stops this being an attractive proposition right now is the very high land prices and the high interest rates, both caused by rates being too low for the last decade and way to low over covid causing a 20-30% blow off top in prices. I agree holding the property over a long period with this approach is investment, speculation is IMHO having a desire to flip the property in 3-36 months etc at a large capital gain.... Both strategies can provide a good profit but the speculative stage of any boom is normally short lived and meet by supply, regulation or common sense and a busty.
I just can't believe that NZ just doesn't have a capital gains tax. Instead they are talking about a wealth tax instead which will by 100 times worse for property investors, and is essentially an envy tax. It will significantly affect many retired people without much in earnings, and is a disincentive to save or get a head in life financially. At least with a CGT, you only pay the tax on the profit when selling the property or business. Which IMO is totally fair, and infact I have heard some very blue property investors say they wouldn't mind seeing the CGT.
How many people know that the banks don't lend out these deposits to borrowers and that it is their lending which creates the deposits in the first place as the Bank of England explains.
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creati…
Historically when the FED goes on hold at the top, they normally start cutting about 6 months later (as things start to break.....) one could imagine that March 2024 could be such a time, The USA is probably doing better then NZ but carries a lot more debt... this "Better" is debatable.... If we look solely at the RBNZ then we could start to cut before the FED. If I had a lot to invest and liked Term deposits I would be thinking now is a great time to fix 50% of the portfolio higher, alternately there are some bank bond issues that may offer slightly better returns for more sophisticated investors. This may not be the top but IMHO things will break quickly if rates go much higher. For countries that do not produce and refine their own oil.... the next decade could be frustrating....
6% interest term deposits bring back memories of 2007. It got as high as 8%, paid monthly. Ah, the good ol' days before disaster struck.
You wouldn't catch me giving my money to them this late in the piece as I'm not sure even 50% at the end of term would compensate the risk of never seeing it again. Remember, your bank's "terms and conditions" (that you never read) say that you have done your due diligence and have "invested" with the bank. You are an unsecured creditor. Remember, the problem caused by the 2008 GFC was never fixed - it's just a multitude of proportions worse now.
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