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

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

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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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MONIQUE FORD / TIPS

ANZ Chief Economist Miles Workman shares the country’s biggest bank’s forecast for the housing market in 2022.

“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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