It has only been a week since our last term deposit update, but there have been a lot of changes. The general direction is down of course, but not everyone has moved lower. So that opens up some competitive options which savers will likely want to consider - before there are catchup changes.
Oddly, Wednesday's less-than-expected rise in unemployment which happened just as global market worries eased, both seem to have pushed 'pause' on wholesale rate declines.
In turn, that may well have some banks holding off further changes (read: cuts) for a short while at least.
The key local influence is loan demand, and that weakness probably hasn't eased.
The first thing to note is that there are now no main banks offering 6% rates. It has only been one year that we have had main bank term deposit (TD) rates at, or over, 6%. In hindsight, it hasn't lasted very long.
Secondly, most of the reductions have been for terms of one year or more.
So for savers, these options are worth considering before 4% rates start blowing in.
Six percent or higher rate offers are now only available from:
- Bank of China for six months
- Heartland Bank for six months and nine months
- ICBC for six, nine and 12 months
- Kookmin Bank for one year
- Rabobank for six, nine and 12 months
- TSB for one year
Now rates in the 4% range have already blown in for three years or more. ASB in fact is down to 4.90% for two years, the only bank that low for that term. We suspect we will be seeing more rates starting with a '4' across shorter terms relatively soon.
The highest rate from any bank, any term, is Rabobank's 6.10% for 12 months. After-tax of 30%, that is 4.27% and still positive after inflation that seems to be running at 3.3%.
But for taxpayers on 30% and living in a 3.3% inflation world, that gets breached when offer rates fall below 4.70%. We still have headroom of about 1% before that is reached in the shorter terms. But you have to think we are looking at a future where tax-paid term deposit rates are likely to fall below inflation again. Many savers have been there, done that, and know it is not nice.
Both the wholesale and retail rate curves are falling and flattening, a trend we expect to see for a while yet.
We should also point out that after-tax returns can be enhanced for some savers with higher tax rates, by the choice of PIE structures. Not all banks offer these, but most of the main banks do. For a nine month bank offer, they can be boosted by about 30 basis points going this way. In some cases that will make up any difference, or more.
Always ask a bank for a better rate. Many bank staff have discretion to offer more than the advertised rate. (And check your bank's app offers as they too are often enhanced to retain you). But in this environment don't get your hopes up for a positive response. Carded rates are likely to now be the 'best rate', except in quite special circumstances.
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 changes. Update: Westpac has now also cut its rates, which are in the table now also. Update II: The table has been updated with new BNZ rates, taking them down to among the lowest of any main bank.
| for a $25,000 deposit August 8, 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 | 5.75 | 5.75 | 5.60 | 5.30 | 5.05 | 4.80 |
 |
AA- | 4.40 | 5.75 | 5.70 -0.05 |
5.50 -0.10 |
5.20 -0.20 |
4.90 -0.20 |
4.80 -0.30 |
 |
AA- | 4.30 | 5.90 -0.05 |
5.60 -0.30 |
5.40 -0.40 |
5.00 -0.40 |
4.80 -0.40 |
4.60 -0.40 |
 |
A | 5.00 | 5.90 -0.10 |
5.80 -0.10 |
5.65 -0.15 |
5.25 -0.20 |
5.00 -0.10 |
|
 |
AA- | 4.30 | 5.80 -0.10 |
5.70 -0.10 |
5.50 | 5.20 -0.30 |
4.90 -0.30 |
4.70 -0.30 |
| Other banks | ||||||||
| Bank of China | A | 5.40 -0.10 |
6.00 -0.10 |
5.95 -0.15 |
5.85 -0.20 |
5.55 -0.40 |
5.50 -0.20 |
5.15 -0.20 |
| China Constr. Bank | A | 5.50 | 5.80 | 5.90 | 5.95 -0.05 |
5.85 | 5.50 -0.15 |
5.30 -0.10 |
| Co-operative Bank | BBB | 4.30 | 5.85 | 5.75 -0.05 |
5.65 -0.15 |
5.30 -0.30 |
5.05 -0.30 |
4.85 -0.30 |
| Heartland Bank | BBB | 5.40 -0.10 |
6.10 -0.05 |
6.00 -0.10 |
5.85 -0.15 |
5.65 -0.25 |
5.45 -0.20 |
5.15 -0.20 |
| ICBC | A | 5.50 | 6.10 | 6.05 | 6.05 | 5.90 | 5.60 | 5.40 |
| Kookmin Bank | A | 4.40 | 5.60 | 5.70 | 6.00 | 5.00 | 4.60 | |
 |
A | 4.55 | 6.00 | 6.00 | 6.10 | 5.70 | 5.50 | 5.20 |
 |
BBB | 4.30 | 5.95 | 5.90 | 5.80 | 5.60 | 5.30 | 5.30 |
 |
A- | 4.25 | 5.80 | 5.80 | 6.00 | 5.60 | 5.40 | 5.20 |
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40 Comments
Interest rates are going down = get out IF you can.
(A lot of multi property owners are going to get caught 'long,' as their net Debt is overwhelmed by the falls in the asset prices underpinning that Debt, and the Lenders - the banks - won't allow any sales unless there is a Top-Up of the missing collateral value i.e. they will have to pay, to sell. I know! Property ALWAYS goes up, right?)
(PS: Why is our Minister for Housing telling us that "Property prices have to fall"? For the same reason that the RBNZ told us that a Recession was being engineered. (1) They know what's coming - why the PM is selling? And (2) so that no one can say "Why wasn't I told!")
Chris Bishop said that housing needs to be more affordable, and he proposed ways in which new houses could be more affordable.
Not many property owners will be caught out. Maybe 10 % who have been poorly advised. Many multi property owners have equity of 50-60%, and the income is easily sufficient to pay for the loans at the current rate, plus there is an income stream, so no need to sell. Many investors are getting back into the market, as there are bargains to be found.
Many investors are getting back into the market, as there are bargains to be found.
Can you remind me that despite it not even the peak spring listing season yet, why house prices are still falling and unsold inventory rapidly rising?
No matter what the market is doing, people are always buying. Whether or not they're bagging bargains is another matter altogether, especially when the market is still overpriced. If one really has to buy in the short term, lowballing is best. What's the hurry? edit
RP, you are the one with the "reckon" statements, posting hundreds every month.
There are plenty of bargains to be found outside of Auckland - you just have to look on the real estate websites. Or you just need to ask people who are buying at present, and they will tell you how much they knocked off the asking price.
Regarding investors coming back into the market, just look at the figures published on interest.co.nz. You will see that investor borrowing has risen from around 17% to around 20% of total borrowing (ie bank loans).
Why are house prices falling - well they are in Auckland, and that is because they are overpriced. Elsewhere, house prices are still rising.
Why is unsold inventory rising - numerous reasons for this, including that we are in a recession, and it is in the middle of winter.
Just curious, do you always laugh at others who have a bob or two?
Poopy, what makes you think I upvote myself?
Yes, you do upvote yourself. Others have called you out for it too. You come across as really that desperate for recognition.
Small man syndrome perhaps?
Don’t forget what the first 3 letters of the word assume read. And that’s exactly how you come across making idiotic assumptions. I couldn’t care if my comments get upvoted or not. You on the other hand obviously have issues with accepting reality.
Anyway, enjoy your shit TD rates mate, and get a life while you’re at it.
Fails to realise that most assets are declining in value.
Thus, interest rates may reduce, however the buying power of this cash is increasing more than enough to compensate.
The decline in purchasing power of this saved cash is only relevant if relied upon for everyday living (costs which are going up and pulling down house and other asset prices).
Savers who have other income to live on are in a sweet spot now, regardless of interest rates.
I'd rather have investments that will rise as interest rates fall, but each to their own.
You shouldn't assume that as interest rates fall, asset prices rise. Case in point: Japan and the related CRE and residential property and equity assets. All these asset prices have risen in recent years - some quite dramatically - but depending on the asset, it could have been falling for 30 years.
JGB-related instruments were good for smaller Japanese investors as they were stable during a period when general prices were falling.
I'm not sure how that can work for Aotearoa. For ex, we do not have policies that enable market prices to remain stable. F'more, we have barely any infrastructure in place like Jp, Korea, China, and S'pore. This lack of investment makes me skeptical that we can have a low-inflation environment.
100% wasted on paying higher rates
Yes, valid point. Interest along with rates and insurance is 100% dead money, and when the asset is declining in value - WOW. Financial and emotional wellbeing must be considered before transitioning from a renting expense to owner occupier expense. Renters who have large TD's are able to enjoy financial and emotional freedoms too. For many recent buyers, home ownership has become an unpleasant rollercoaster ride. Timing entry into the market at it's weakest point armed with a large deposit forms the most solid of foundations to financial freedom.
On an investor perspective, those who post about yield being of foremost importance need to be more forthcoming about what an acceptable yield should be right now that truly reflects the risk premium when stacked side by side with less riskier TD's. I think it should be at least 9% average before expenses. Not the current 5%. Investors are being short changed and deep down they know it.
Yay !!!
Savers, like me, that have been 'saving' for the last two years, can, as interest rates fall, get back to building 'stuff'. Yay !!!!
Rewarding rich people, with spare cash who save it for the high interest rates (like me), is ... quite frankly !!!! ... a massively stupid part of our neo-liberal economic system.
Rich get richer. Sucky !!! Sucky !!! Sucky !!!
[Angry rant over].
Kiwi bonds are best right now in my view. Due to their security and only being slightly worse than the banks.
The other thing is that if the govt brings in the deposit insurance penalty, I'd say that longer term deposits are better because you are not paying this levy in later years.
The payment is completely unrelated to any tax payments you've made.
It's up to the older generations whether they make sensible cuts to Super of their own accord while they still have political power, or if they wait 5-10 years for the next generation to make much harsher cuts on their behalf.
Wow...theres a few roo's loose in the top paddock ....lol 'Anyway, enjoy your shit TD rates mate, and get a life while you’re at it.'...'lets start a discussion on cutting the pension for rich retirees who don’t need additional free govt money'.... all this because TD's tweak ? Really?...
'cutting the pension for rich retirees'... Why should folk that have built up wealth be punished for doing so? Plenty of folk worked hard to ensure their retirement is comfortable. Plenty of folk know the pension is not adequate on its own. Nothing wrong with having a surplus to squander in your old age. If folk wanna spend all their money living day to day then thats their choice... Should those that squandered their wealth throughout the decades be favored over those that were prudent? Only fair that all get the same regardless of present circumstance surely? So the TD rate nudges those with liquidity and its celebrated by those that anticipate credit rising ...which is fair enough but using foul language and or singling out the rich retirees as being a societal problem seems somewhat farcical too me.
Interest rates are coming down but it is notable how little progress has really been made in reducing domestic inflation, which still sits above 5%. Reductions in CPI inflation largely reflect the success of the larger economies in lowering their own nflation, which has lowered our imported price inflation. But whether its local body rates, insurance premiums, electricity or various government charges, non-tradables inflation in NZ remains very much alive. We can predict what is about to happen. The Reserve Bank will be goaded into cutting interest rates by the loud mouthed market commentators over the coming months, sowing the seeds for yet another housing market boom - New Zealand's idea of growth and prosperity. God help us.
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