Kiwibank raises term deposit rate to 4%, putting it ahead of its competitors

Kiwibank's one-year forward rate sits around 0.35% above most of its competitors.


Kiwibank’s one-year forward rate sits around 0.35% above most of its competitors.

Kiwibank raised its one-year term deposit rate to 4%, putting it above most of its competitors.

The new rate is an increase of 0.25% and requires a minimum investment of $10,000, but those depositing $5,000 to $9,999 will also receive a rate of 3.9%.

The offer will be available for two weeks from Monday.

ANZ chief economist Miles Workman said customers could expect short-term rates to rise as the official exchange rate (OCR) is expected to continue rising.

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“It’s no surprise that term deposit rates are rising as OCR increases. Essentially, you can think of a bank as a sort of money retailer, where it borrows money from depositing households and lends to people who want a home loan.

He said that since longer-term rates already priced in expectations of a higher OCR, there was less scope for them to rise.

“Short-term interest rates have more room to maneuver, simply because the OCR is at 2%, and we expect it to peak at 3.5%.”

Workman says he expected the Reserve Bank to raise the OCR by 0.5% on Wednesday, with another 0.5% hike in August, followed by possible slower 0.25% hikes from there.

Kiwibank’s new rate is above what competitors advertise online, with ANZ currently requiring an investment of $10,000 to yield 3.65% over a one-year term.

ASB and Westpac also sit at 3.65%.

The move in Kiwibank’s one-year rates follows the lowering of interest rates on home loans by a number of banks, as the cost of wholesale funding for banks fell in recent weeks.

Commentators said it gave lenders the option to reduce the retail rates they offer customers.


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