Term deposit savers are facing lower interest rates in 2025 from a number of factors, not the least of which is that banks face depressed lending opportunities. The DCS is also a factor

BNZ was the last major bank to trim term deposit rates in 2024, and it is the first to do so in 2025.

They have left their six month rate at 5.00% unchanged (and their only 5% or greater rate), but have reduced all other rates for terms of five months to one year.

Perhaps it is something of a pleasant surprise that 5% rates are still available to start 2025, but that is perhaps due to the changing situation in global interest rates. There is now less of a chance that rates will keep falling like they did in 2024, mainly because of renewed upward inflation expectations.

Almost certainly, the RBNZ's February 19 OCR review will bring another rate cut. Financial markets are assuming it will be -50 bps and taking the OCR to 3.75%. But other benchmark rates have stopped falling, and longer rates are rising again. We start 2025 with increased uncertainty on where the year's rate track will take us.

We have added to our summary table below to include the registered Non-Bank Deposit Takers (NBDT). And we have split that group into two categories, the community-based institutions, and the finance companies.

NBDTs will be covered by the Deposit Compensation Scheme when it is rolled out mid-2025. And because mid-2025 is less than six months away (and a six month term is one of the most popular for TD savers), it is important to know what the options are going to be for coverage by the deposit guarantee.

Only one of this added group has an investment-grade credit rating; Liberty Financial.

The community NBDT institutions want you to see them as a local alternative to banks "keeping the profits in the community".

The finance companies want you to see they are an "enhanced rate option" for longer term deposits.

All banks and NBDTs will be charged a fee for the Deposit Compensation Scheme coverage when it is implemented. That fee will be 'risk-based' so higher for institutions that carry higher credit risk. The credit rating will be one way to assess relative riskiness.

All we know at this point is that Treasury aim to build a fund from these fees equal to 0.8% of the covered deposits after 20 years. But that doesn't tell you how those fees will be imposed on each institution. And those fees will be at the expense of what they can offer depositors. In essence, depositors will be paying for this protection in lower offered interest rates.

And there is a twist to realise. The protection is for all of a customer's deposits at an institution, whether they earn interest (savings and term deposit accounts) or not (current accounts). So the fee the institution pays can only really be deducted from the savings and term deposit account rate offers - unless some institutions start charging fees for current accounts. What savers need to know now is that interest rate offers will have to reduce between now and the introduction of the DCS scheme. (We don't know how each will handle the transition rates taken out before the DCS starts.)

Also remember, until loan demand picks up, there is little incentive for any bank or other deposit taker to offer more for deposits.

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.

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 over the past week. The background colour-code indicates 5%+ rates still available.

for a $25,000 deposit January 14, 2025	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Main banks
ANZ	AA-	4.25	5.05	4.90	4.75	4.55	4.45	4.35
	AA-	4.25	5.05	4.90	4.75	4.55	4.35	4.35
	AA-	4.20	5.00	4.75	4.70	4.55	4.35	4.40
	A	4.40	5.10	4.90	4.80		4.50	4.40
	AA-	4.30	5.05	4.90	4.75	4.60	4.40	4.40
Kiwi Bonds. 'risk-free'	AA+		4.50		4.25		3.75
	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Other banks
Bank of China	A	4.60	5.35	5.20	5.00	4.75	4.55	4.45
China Constr. Bank	A	4.40	5.00	4.95	4.85	4.65	4.50	4.40
Co-operative Bank	BBB+	4.15	5.15	4.90	4.80	4.60	4.50	4.40
Heartland Bank	BBB	4.65	5.05	5.00	4.75	4.65	4.50	4.40
ICBC	A	4.65	5.35	5.05	4.95	4.75	4.55	4.40
	A	4.35	5.10	4.95	4.80	4.65	4.40	4.40
	BBB	4.25	5.10	5.00	4.80	4.50	4.50	4.50
	BBB+	4.25	5.05	4.90	4.75	4.55	4.40	4.40
Non-Bank Deposit Takers	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Community institutions
First Credit Union	BB	4.25	5.25	5.00	4.90	4.60	4.50
Heretaunga Bldg Society		4.30	5.15		4.85		4.50
Nelson Building Society	BB+	4.00	4.85	4.70	4.55		4.15	4.15
Police Credit Union	BB+	4.20	5.05	4.90	4.75	4.50	4.30
UnityMoney	BB	4.25	5.00	4.80	4.55	4.45	4.25	4.25
Wairarapa Bldg Society	BB+	4.05	4.50	4.90	4.75	4.50	4.30
Finance companies
Christian Savings	BB+	4.40	5.15	5.00	4.85	4.65	4.45	4.45
Finance Direct			3.95		6.50	5.90	6.00	6.10
General Finance	BB	4.55	6.05	6.15	6.25	6.00	5.75	5.50
Gold Band Finance	BB-		3.75	3.75	6.40	6.20	5.75	5.75
Liberty Financial	BBB	4.25	5.85	5.65	5.50	5.00	5.00	4.90
Xceda Finance	B+		6.50	6.40	6.40	6.00	5.80	5.50