Term deposit savers get some surprising 'friends' in a handful of major banks who have boosted some interest rates following the latest OCR cut

ANZ’s response to Thursday’s OCR cut is throwing the spotlight back on term deposits.

Both Westpac and ASB have adopted the ANZ position of giving only minor pass-through benefits to floating rate home loans, but offering good increases on selected term deposit terms.

BNZ has followed, increasing its 18 month TD offer by +30 bps to 3.60%. Kiwibank has focused all its OCR reaction on the floating mortgage rate.

Term deposit savers have actually held on to some of the benefits since the RBNZ’s policy rate reductions started in June 2015. Over that period, the OCR has been reduced from 3.25% to 2.00%, a decline of -1.25%.

But over that same time, the one year term deposit rate has moved from 4.25% (bank average) to 3.30%, a fall of only -0.95%.

If this weeks rises hold and more institutions start competing for deposits, more of this fall could be clawed back.

Here are the latest changes announced:

Bank/Term Previous rate change New rate
  % % %
ANZ:      
150 days (5 mths) 3.00 +0.25 3.25
270 days (9 mths) 3.50 special
extended
3.50
18 months 3.30 +0.30 3.60
ASB:      
18 months 3.20 +0.45 3.65
BNZ:      
18 months 3.30 +0.30 3.60
Westpac:      
180 days (6 mths) 3.00 +0.50 3.50

Only time will tell how long these banks hold these higher term deposits. This same strategy has been used in Australia and the experience there has been that these benefits get withdrawn in a few months, even though the mortgage holdback is retained.

And it is worth noting that equity analysts applaud this kind of strategy because it improves bank margins (at the expense of customers).

There is no evidence yet that these banks will withdraw the rate improvement on this side of the ditch, but the Australian evidence is worth taking note of.

Use our deposit calculator to figure exactly how much benefit each option is worth; you can assess the value of more or less frequent interest payment terms, and the PIE products, comparing two situations side by side.

All carded, or advertised, term deposit rates for all institutions for terms less than one year are here, and for terms one-to-five years are here.

Term PIE rates are here.

The latest headline rate offers are in this table.

for a $25,000 deposit Rating 6 mths 1 yr 18 mths 2 yrs 3 yrs 5 yrs
               
AA- 3.15 3.25 3.60 3.35 3.40 3.60
ASB AA- 3.20 3.20 3.65 3.25 3.35 3.55
AA- 3.15 3.25 3.60 3.35 3.40 3.60
Kiwibank A+ 3.15 3.20   3.15 3.20 3.10
Westpac AA- 3.50 3.20 3.20 3.25 3.30 3.40
               
BBB- 3.10 3.15 3.25 3.30 3.35  
Heartland Bank BBB 3.30 3.40 3.40 3.60 3.70 3.80
HSBC Premier AA- 2.80 2.90   2.90 2.95 3.05
RaboDirect A 3.30 3.40 3.40 3.45 3.55 3.80
SBS Bank BBB 3.30 3.25 3.30 3.35 3.40  
A- 3.00 3.10 3.25 3.30 3.50 3.70
UDC AA- 3.25 3.45 3.45 3.30 3.30 3.40

Our unique term deposit calculator can help quantify what each offer will net you.

<!–

//–>