In something of a curious move, ASB has trimmed two key term deposit rates Thursday.
It has cut five basis points from its six month term deposit offer, to 6.00%, and cut 10 bps from its one year offer to 5.90%.
What makes these moves curious are a number of factors.
Firstly, other main banks are not trimming, yet anyway. (Or some did it a while ago.)
Secondly, wholesale interest rates are rising, and have spurted higher on the recent inflation data. You can see how that is happening in the swap rate charts below.
And thirdly, wholesale market pricing for the future Official Cash Rate (OCR) track is winding back the prospects of RBNZ rate cuts rather fast over the past week. We get this perspective daily and this market pricing has gone from implying three rate cuts just two weeks ago, to only two -25 bps cuts at the start of this week, to today now only pricing in one -25 bps cut and not now until the November 27 RBNZ review. That is a fast rollback and if it continues, the next indication might be that financial markets won't be pricing in any in 2024.
Of course, banks need customer deposits to allow loans to be made. They fund their lending from capital, wholesale borrowings and customer deposits. The largest funding source is the "non-market" customer deposit base. See the Reserve Bank series L3. Total customer deposits make up nearly three quarters (73.5%) of all funding, and household deposits make up a bit more than half of those (54.2%, S40).
But if loan demand is weak, they don't need to grow that deposit base, so they need to dial back on the incoming household deposits, 53% of which are in the form of term deposits.
Responding to weak loan demand is not much to do with the movements in wholesale interest rates (here or overseas) or funding sources, and a lot to do with customer deposit flows.
That is why wholesale rates can rise, and prospects for future OCR rate cuts can fall, but banks will still trim term deposit rate offers.
It is largely due to loan demand.
And currently, that is weak.
In February 2024, new mortgage loan demand was 4% lower than the average for a February month over the past decade (C31). Total bank mortgage loan growth (C5) was under 3.1%, the slowest pace in almost 12 years. And it is not as though other sectors are picking up the slack. Business loan growth is 1.7% versus 5.7% in February a year earlier. Rural loan growth was a measly 1.0% and has been weak (even negative) since 2019. Without home loan growth, competition for deposits will be tepid at best.
And all this comes as customer deposit balances rose in February by their second fastest year-on-year rate in 15 months. (L3)
Household term deposit savers may be facing a period where they are actively shunned by banks. We are not quite there yet, but it is uncomfortably close.
Currently Heartland Bank and Rabobank generally have the highest longer term rates. The Bank of China joins them with the highest short-term rates
Use the term deposit calculator here, or the one below the table, to calculator your expected net returns.
The latest headline term deposit rate offers are in this table after the recent increases.
| for a $25,000 deposit April 18, 2024 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 4.30 | 6.00 | 6.00 | 6.00 | 5.90 | 5.65 | 5.30 |
 |
AA- | 4.40 | 6.00 -0.05 |
6.10 |
5.90 -0.10 |
5.90 | 5.60 | 5.30 |
 |
AA- | 4.30 | 6.05 | 6.10 | 6.00 | 5.90 | 5.60 | 5.30 |
 |
A | 4.40 | 6.15 | 6.10 | 6.10 | 5.60 | 5.25 | |
 |
AA- | 4.30 | 6.00 | 6.00 | 5.90 | 5.80 | 5.50 | 5.30 |
| Other banks | ||||||||
| Bank of China | A | 5.50 | 6.20 | 6.20 | 6.15 | 5.95 | 5.70 | 5.35 |
| China Constr. Bank | A | 5.50 | 5.80 | 5.90 | 6.00 | 5.85 | 5.65 | 5.40 |
| Co-operative Bank | BBB | 4.20 | 6.15 | 6.10 | 6.10 | 5.90 | 5.70 | 5.35 |
| Heartland Bank | BBB | 5.50 | 6.05 | 6.15 | 6.30 | 6.10 | 6.10 | 5.85 |
| ICBC | A | 5.35 | 6.15 | 6.15 | 6.20 | 5.95 | 5.90 | 5.55 |
| Kookmin Bank | A | 4.40 | 5.60 | 5.70 | 6.00 | 5.00 | 4.60 | |
 |
A | 5.05 | 6.15 | 6.20 | 6.30 | 6.10 | 6.10 | 5.90 |
 |
BBB | 4.30 | 6.10 | 6.15 | 6.05 | 5.60 | 5.60 | 5.30 |
 |
A- | 4.25 | 6.00 | 6.00 | 6.10 | 5.90 | 5.65 | 5.35 |
Term deposit rates
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26 Comments
I never bothered to call anyone up and ask for a better rate, occasionally I would go through the process of locking in a TD online and find that the rate was 0.15% or 0.25% better than the one listed on their website. When my TDs would mature I'd just shift them to whichever bank had the best rate for the term I was looking for. I imagine the data they collect makes it fairly obvious to all the banks that I'm doing this, so I'd expect that if they actually cared to compete for deposits they would call you up and see if they could entice you back with a better offer.
In most banks Treasury - Funding set the carded rate, on an internal website they list the discretion that can be offered vs carded rates by call center / branch etc (can vary by amount and term). Sometimes there is no discretion, but this is normally only during crisis like GFC.
so yes worth always trying
I have a constellation of TDs, at six and twelve months. Reasonably large. Westpac.
Deal with them on email. Takes about two minutes. Very non time consuming.
From about two years ago I would always have a back and forth conversation about a better rate. Usually successful. 0.05 to 0.15 extra.
Now they initiate an offer about 0.10 over advertised even before I ask. So good.
Recently started a TD with ANZ, but that's not about rates, more about looking forward to cover under the future deposit scheme.
1689 Baptist. You don't get a better TD rate than advertised, tried several times on the phone. The ASB was well aware that the BNZ had a special at the time I refixed for a year, it was pure luck and the window of opportunity lasted a matter of weeks. The BNZ had 6.25% for 12 months so the ASB offered 6.26% that's as good as it gets for a major bank. My TD is too big to even look at 2nd tier banks, not worth the risk for a fraction of a percent. Note that I don't have anything else with the bank so they can screw me on a huge mortgage on one hand while giving me a fraction of a percent better on some minimal TD.
I have TDs across eight banks, new one rolling over each week or so, always get something above advertised rate when I ask, unless it's a market leading rate (e.g., Rabo or Heartland) and I can't be bothered asking. Usually, it helps to be specific about which other bank's rate you are looking at. It helps if you are moving money into a bank to get a higher rate from that bank.
Looking with a time horizon of just a few weeks ahead, short term deposit rate cuts might look odd when other i-rate indicators appear to be going up. But with a time horizon of a year or more, it isn't much of a surprise.
At the long end, if they start cutting, and before an OCR cut, we'll get an inkling. After an OCR cut, the size of the cuts at the long end will be quite enlightening. Current rates at the long end look very appealing given what's likely to happen in the next six to twelve months.
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