We last looked at term deposit rates for savers just one week ago but there have been some significant shifts already. And sadly for savers, they're all down.
We have used a dot-plot in our home loan reviews recently. This can work just as effectively with term deposits to give a good, easy view of the relative positioning of the offers across the main retail banks.
And as you can see, there are outliers.
But these are banks that are likely to move fairly soon. So no time to waste to take advantage.
Our dotplots however don't cover all banks. But our table below does cover most retail banks including some not in the dotplots.
Only two banks, Rabobank and Kookmin Bank, offer rates of 6% - none more than 6%. Six percent rates have almost vanished and that has been a very fast retreat.
When you invest, always check how interest is compounded. Depending on how much you are committing, compounding more often is materially better. But some banks advertise their "interest at maturity" rates different to their compounding rates (which for some can be set a little lower). Both Kiwibank and Rabobank do this, although most other main banks don't.
Use the calculator at the foot of this article to see the differences.
Now rates in the 4% range have already blown in for 18 months or more. We are seeing more rates starting with a '4' across shorter terms now. As you can see most majors have rates starting with a '4' for 18 months now. Soon even shorter.
The highest rate from any bank, any term, is Rabobank's 6.00% 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 but it is retreating quickly. You now 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 to start the week.
| for a $25,000 deposit August 26, 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 | 5.50 | 5.20 | 4.90 | 4.70 | 4.60 |
 |
AA- | 4.40 | 5.65 | 5.30 | 5.20 | 4.80 | 4.50 | 4.50 |
 |
AA- | 4.30 | 5.80 | 5.30 | 5.20 | 4.80 | 4.65 | 4.50 |
 |
A | 4.90 | 5.70 | 5.45 | 5.45 | 4.90 | 4.70 | |
 |
AA- | 4.50 | 5.70 | 5.40 | 5.10 | 4.90 | 4.70 | 4.50 |
| Other banks | ||||||||
| Bank of China | A | 5.30 | 5.90 | 5.60 | 5.50 | 5.10 | 4.90 | 4.90 |
| China Constr. Bank | A | 5.30 | 5.50 | 5.40 | 5.35 | 5.20 | 5.05 | 5.00 |
| Co-operative Bank | BBB | 4.30 | 5.80 | 5.50 | 5.30 | 4.90 | 4.70 | 4.60 |
| Heartland Bank | BBB | 5.30 | 5.90 | 5.70 | 5.60 | 5.20 | 5.00 | 4.80 |
| ICBC | A | 5.40 | 5.95 | 5.75 | 5.65 | 5.30 | 5.15 | 5.05 |
| Kookmin Bank | A | 4.40 | 5.60 | 5.70 | 6.00 | 5.00 | 4.60 | |
 |
A | 4.55 | 6.00 | 6.00 | 5.80 | 5.50 | 5.30 | 5.05 |
 |
BBB | 4.30 | 5.80 | 5.80 | 5.50 | 5.00 | 4.70 | 4.70 |
 |
BBB+ | 4.25 | 5.75 | 5.50 | 5.20 | 5.00 | 4.70 | 4.60 |
Term deposit rates
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6 Comments
From my impressions, banks are really trying to get the housing market moving again and to get prices rising, and creating FOMO. That is when they start banking it in again and they aren't wasting anytime. That comes at the cost to savers. IMO the current rates are not high historically, but NZers got addicted to cheap money to buy houses, leading to some of the most expensive houses in NZ. Sellers don't want to sell for less than they paid, which has stalled the market, even though some have made significant losses compared to what they paid in 2020-2022. But you rarely see stories about those people.
TD rates still look good to me for at least the next 9 months considering the downward trend. Things will not be great in 12 months however, may be lucky to get something in the 5's. No big deal, got to the top of the hill a few years ago now its all downhill coasting from here.
I heard someone on the radio talking to a financial expert, and they said they were waiting for the government guarantee scheme to come in, then they could invest in the finance companies that would also be covered by it, as they should offer higher % returns. I thought that was interesting, and I wonder if they will offer rates much better than banks if it is all government guaranteed. IMO they shouldn't be covered by it. But it has taken far too long for it to come in.
Pity. High interest rates on deposits (and mortgages) were helping reduce house prices, while rewarding those who have the discipline to save. Looks like that's going to reverse again soon. Savers will be increasingly compelled to pull their savings out and invest it somewhere else, probably into an investment property, knowing NZ's "investing habits". Especially when/if net rental yields will be higher than TD yields.
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