Update: The table below has been updated with subsequent Kiwibank and Co-operative Bank rate reductions.
With banks chasing a very slim landscape of lending opportunities, the prospects for savers is dulling fast.
After Wednesday's 50 basis points (bps) Official Cash Rate cut, the knife is out on term deposit rate offers.
Savers don't do themselves many favours by staying very short. And in a falling rate market, it is an uncomfortable place to be.
Just 10 days after we essentially waved goodbye to main bank term deposit (TD) rates of 5% or more, now we are watching the approach of rates that may soon start with a '3'.
In fact, ANZ's latest 90 day TD rates has fallen -20 bps to 3.95% and the only bank this low. Most of ANZ's changes were of -25 to -40 bps reductions.
This move by the nation's largest bank has opened up quite a separation even from other big banks. It may not last of course - why would BNZ for example offer 30 bps more than ANZ? - or Kiwibank offer 40 bps more than ANZ? - but these opportunities are there right now.
Our guess - and its only speculation - is that the other banks will follow ANZ down soon. There is no cost for them to do so, only gain. And they can't really let ANZ gain home loan market share with lower mortgage rates.
In the background, wholesale rate falls seem to have stalled, and are still at about the same level they were a month ago. So no wholesale pressure here for lower rates. Loan demand levels will be playing an outsized part in why banks are offering savers less.
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 February 20, 2025 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 4.00 | 4.40 | 4.35 | 4.20 | 4.15 | 4.10 | 4.15 |
 |
AA- | 4.15 | 4.40 | 4.45 | 4.30 | 4.30 | 4.20 | 4.30 |
 |
AA- | 4.20 | 4.70 | 4.60 | 4.50 | 4.40 | 4.35 | 4.40 |
 |
A | 4.00 | 4.50 | 4.25 | 4.25 | 4.10 | 4.10 | |
 |
AA- | 4.10 | 4.55 | 4.65 | 4.40 | 4.40 | 4.40 | 4.40 |
| Kiwi Bonds. 'risk-free' | AA+ | 4.00 | 3.75 | 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 | 4.40 | 4.90 | 4.75 | 4.70 | 4.65 | 4.45 | 4.45 |
| China Constr. Bank | A | 4.25 | 4.90 | 4.70 | 4.65 | 4.55 | 4.45 | 4.40 |
| Co-operative Bank | BBB+ | 4.15 | 4.70 | 4.60 | 4.50 | 4.40 | 4.35 | 4.40 |
| Heartland Bank | BBB | 4.55 | 4.90 | 4.80 | 4.65 | 4.50 | 4.45 | 4.45 |
| ICBC | A | 4.40 | 5.00 | 4.85 | 4.80 | 4.60 | 4.45 | 4.40 |
 |
A | 4.35 | 4.85 | 4.70 | 4.55 | 4.50 | 4.35 | 4.35 |
 |
BBB | 4.25 | 4.85 | 4.75 | 4.60 | 4.40 | 4.40 | 4.40 |
 |
BBB+ | 4.15 | 4.60 | 4.55 | 4.40 | 4.40 | 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 | 5.00 | 4.80 | 4.70 | 4.60 | 4.50 | |
| Heretaunga Bldg Society | 4.30 | 4.90 | 4.70 | 4.50 | ||||
| Nelson Building Society | BB+ | 4.40 | 4.40 | 4.30 | 4.20 | 3.90 | 4.00 | |
| Police Credit Union | BB+ | 4.20 | 4.80 | 4.70 | 4.55 | 4.40 | 4.20 | |
| UnityMoney | BB | 4.25 | 4.75 | 4.55 | 4.45 | 4.25 | 4.20 | 4.15 |
| Wairarapa Bldg Society | BB+ | 4.05 | 4.50 | 4.80 | 4.75 | 4.50 | 4.30 | |
| Finance companies | ||||||||
| Christian Savings | BB+ | 4.25 | 5.00 | 4.90 | 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 |
| Mutual Credit Finance | B+ | 6.50 | 6.50 | 6.75 | 6.25 | |||
| Xceda Finance | B+ | 6.50 | 6.40 | 6.40 | 6.00 | 5.80 | 5.50 |
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23 Comments
Now would seem an appropriate time to commence divesting term deposit funds into alternative asset markets ........
Diversification is the key - especially in times of uncertainty.
TTP
For many, the non bank deposit takers insurance to $100k will be an attractive alternative from mid year
That will be a very positive development for savers and help facilitate lending competition as non-bank lenders can diversify funding away from bank warehouses.
Isn’t that what they want to happen, to get people investing back into buying rentals etc. The interest rates over the last few years have been good compared to the hassle of owning a rental and often no capital gains over that period
Maybe TTP. Term deposits are the diversification.
To be fair, we all know Term Deposits are not a hedge against inflation.
They are just a place to put your money with next to no risk and are generally for non investors.
There are far better investments with better returns and with financial appreciation.
There have been long periods where term deposit rates minus tax have been better than CPI.
When interest rates were dropping it paid to go for the 5 yr ones....
Risk / reward
The average long run return on a balanced fund is ~5-6%. Its a VUCA world & at 70 years old my 6.35% PIE TD enables me to sleep better.
The flip side of lower interest rates for savers is lower tax take ( increased govt borrowing) and lower spending for those who depend on term deposits for income. While the lower mortgage rates MAY result in higher spending by those who have mortgages - it is not a given ( do they spend or do they rebuild their balance sheets especially with the prospect of higher inflation) . The whole equation is a balancing act.
People want to see the equation as black and white ( it makes it easy) when in fact it is an intersection of multiple factors.
As I've said before what happens if people are so maxed out on debt that they can't consume any more or they decide they don't want to consume any more and close their wallets ( as an example the subscription model for software). .
Lower interest rates will mean a higher tax take on investment properties. The lower the interest rate the lower the deduction for interest.
That assumes that the landlord makes a profit. All lower interest rates do is shift some landlords from making a loss to making a profit but some will still be making a loss on their "investment" (then there is accumulated losses etc). Interest earned is taxed before it even gets to the saver.Profit is conditional.
Savers are the enemy!
What this country needs is a wave of bold young things, who are prepared to back themselves and borrow (for a house) until hurts.
Only through housing debt can we make NZ great again.
I would laugh if it wasn’t actually what they wanted to happen. To get young people buying back into the housing ponzi. A lot of older people currently can’t sell their properties for what they need to buy into retirement villages, which went to a lot during the COVID period and didn’t go down again
Sad:( I wonder how much of the money from TDs might start to pour into an asset class that's currently selling "at a discount" - real estate. Other popular alternatives for an unsophisticated saver/investor (like myself) don't look enticing enough anymore - gold, US stocks, BTC, are all sitting close to the all time highs.
Other popular alternatives for an unsophisticated saver/investor (like myself) don't look enticing enough anymore - gold, us stocks, BTC, are all sitting close to the all time highs.
Well gold and ratty are at ATHs. Following the basic rule of 'buy low, sell high', now would not be the best time to buy. But both are different beasts compared to the preferred investment vehicles under the Ponzinomics regime. You have to think that through for yourself and at least question what you're told by people like Mary Holm. Personally I think the boomers have been banking on the younger demogs to buy their assets at prices that the boomers expect, not what the younger people can afford and / or want to pay.
Gold mining stocks are still well off their ATHs. And you would never see them promoted by the likes of Granny and the Aotearoa financial ecosystem.
Good comment, and thanks for the advice.
By the way, I already own some shares in a gold mining company, so "have my foot in the door" to some degree:)
Mary Holm is over-rated. She parrots the some old things on and on and on. I stopped reading her stuff years ago.
When you stop reading stuff like that it is wonderful because over time you then find that you are making your own decisions. Ones which are not what everyone else are making. Are unique and could well be more prudent long term.
Surprised by your comment about Mary Holm. She advises financial literacy, they rest is up to you, it is your money
What does "HFL" stand for ?
Higher for longer?
How did they get there. Which investor is financially more successful.
1, People with enough money to put some into TDs
2. People with not enough money, who have to borrow.
dp
I think what will be key is when the deposit guarantee scheme comes in (EVENTUALLY) and what rates some of these lower tier organisations will be offering to get business. I wonder if banks will struggle to get deposits they need a certain number of money in deposits relative to the amount they lend out?
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