We have previously noted that it is a nervous time for term deposit investors; the wholesale rate floor is moving down putting today’s low retail offer rates at risk.
But it is also a nervous time for bankers as well. Margins are said to be under pressure especially in Australia and the choice is either to raise rates for borrowers (Westpac AU’s choice), or lower them for savers.
The pressure is not as intense in New Zealand – in fact, the latest RBNZ Dashboard data shows little threat to current margins. (See the NIM data P3, here.)
But over the past two days, wholesale swap rates have tumbled as business confidence seem to be leaking away.
Lower business confidence means lower business investment, resulting in lower loan demand on banks, and a lower need for banks to compete for term deposit funds.
In this scenario, it seems unlikely banks will try raising mortgage rates to bolster any margin pressure they may feel (or to subsidise their struggling Aussie parents). The signs are that this years Spring real estate selling season won’t be breaking any records, and in fact could be quite average.
So the risk goes back on term deposit savers.
Today (Friday), TSB has trimmed a range of term deposit rates from three months to five years, taking -5 to -15 bps off selected offers.
Earlier in the week, Kiwibank has taken -5 to -10 bps off a smaller set of rates.
And non-bank NZCU Baywide, a [surprisingly large] credit union also trimmed -5 to -15 bps from its competitive rate offer.
But not all changes have been reductions. SBS Bank added +25 bps to its nine month special offer, taking it to an impressive 3.65%. This is the highest in the market for this term; in fact it is higher than any bank offer for a full 12 months.
Take a look at the latest swap rate charts; it will make unsettling reading if you are a term deposit saver. It might raise the idea that locking in current rates for slightly longer terms is something worth seriously considering. No-one really knows where retail rates are headed, nor can predict the availability of pop-up specials that can be taken advantage of. But until the private sector starts increasing its local business investment it seems likely that savers will be in for a chilly Spring.
These changes mean that for any term deposit offer starting with a four will require investors to consider locking up their funds for five years. It is a choice few make.
PIE rates can give a small boost to pre-tax return equivalents.
Using 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 financial institutions for terms of less than one year are here, and for terms of 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||3/4 mths||5/6/7 mths||8/9 mths||1 yr||18 mths||2 yrs||3 yrs|
Rates in this table are the highest offered by each institution for the terms listed. You however will need to check how often interest is credited or paid. That important factor is not filtered in the above table and rates with various interest payment/credit arrangements are mixed here. However, our full tables do disclose the offer basis.
Our unique term deposit calculator can help quantify what each offer will net you.