Term deposit rates have been rising more slowly than mortgage rates, but they are moving. A new rate change from BNZ this week has shifted where the best available rates are on offer across different term lengths.
Term deposit rates in New Zealand have been rising — just not as quickly as the mortgage rate side of the market. The latest round of changes, including a move by BNZ on Tuesday to lift rates across six specific terms, illustrates where the market sits and how the landscape of available rates has shifted over the past six weeks.
The context: wholesale interest rates have been rising notably, and home loan rates have followed. Retail term deposit rates have been slower to move, but there has been a steady stream of increases, and almost all rates are now higher than they were — even if the moves have been modest.
Where the best rates are on offer
After BNZ's latest changes, the snapshot for a $25,000 deposit as of May 19 shows the following picture across the major banks:
For terms of five to seven months, the best carded rate from a major bank is 3.45 percent, offered by all the major banks. Bank of India is at 3.70 percent, above the deposit compensation scheme threshold.
For eight to eleven months, Heartland Bank leads at 3.75 percent. Among major banks, BNZ and Westpac are both at 3.60 percent.
For a one-year term, Rabobank leads at 3.95 percent, with BNZ at 3.90 percent as the best of the major banks.
For longer terms, ANZ is offering 4.50 percent on a three-year term, 4.20 percent on two years, and 4.00 percent on one year. These longer-dated rates reflect the expectation that rates stay higher for longer — a consistent theme in the wholesale market signals.
The compounding question
The article from interest.co.nz raises an important practical point: how interest is compounded matters, and some banks advertise rates differently depending on whether interest is paid at maturity or compounds. Kiwibank and Rabobank are noted as banks where the "interest at maturity" rate can differ slightly from the compounding rate — a detail that matters if you are comparing headline rates between institutions.
For savers on higher tax rates, the choice of a PIE structure can enhance after-tax returns. Not all institutions offer PIE term deposits, but most of the major banks do.
The gap between retail and wholesale
The lag between wholesale rate moves and retail term deposit rate changes reflects the competitive dynamics of the banking market. Banks have been reluctant to raise deposit rates as quickly as they have raised lending rates — the margin benefit flows to them in the interim. For savers, this means the real return on cash savings has been slower to adjust upward than the return on fixed mortgage debt.
The article from interest.co.nz notes that if rate pressure continues, five percent rates on term deposits may start to appear. That would be a meaningful step up from current levels and would bring New Zealand savers closer to the rates available in comparable markets where the rate cycle has been further ahead.
The deposit compensation scheme — which protects deposits up to $100,000 per institution — remains the baseline safety floor for New Zealand savers. Non-bank deposit takers who are covered by the scheme can offer higher rates because they do not carry the same regulatory capital requirements as registered banks.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.