Rates Update: Rabo’s leadership remains unchallenged

Sophia Rodrigues reports on some unusal moves from the banks in the term deposit rates space.

Monday, February 28th 2011, 9:10AM 2 Comments

by Sophia Rodrigues

Prior to the Tuesday's earthquake, RaboDirect hiked rates in the six, nine and 12-month terms taking leadership position in almost all the terms up to a year.

(Use the links in this story to see each providers current rates)

One would have expected its closest competitors to retaliate with some increases. Instead we saw Kiwibank and HSBC lower their one year rates while other banks remained unchanged.

Kiwibank cut its one-year deposit rate by 15 basis points to now offer 5.05% and HSBC lowered its one-year rate by 10 basis points to offer 5.15%. Following such cuts, the gap between Kiwibank and Rabobank's one-year rate has widened to as much as 50 basis points and with HSBC it is 40 basis points.

Rabo's closest competitor in the one-year space is now TSB which is offering 5.35% but requires a minimum deposit of $10,000. ASB and Westpac follow with 5.20%. This is 35 basis points lower and also requires a minimum deposit of $10,000 to qualify, thus making Rabobank's 5.55% for a minimum $1,000 deposit look very attractive.

In the non-bank deposit taking space, FE Investments has reverted back to the 10% rate on one-year deposits after offering a special rate of 10.18% to coincide with the Chinese New Year. The unrated finance company is offering 5% on 18-month deposits in US dollars and 6% on 24-month deposits in the same currency.

The coming week will be an interesting one for deposit rates as expectations of a cut in the Official Cash Rate by the Reserve Bank get stronger. Many economists are calling for a cut of 50 basis points as they believe a monetary policy move is as important as fiscal measures from the government as New Zealand seeks to recover from the effects of the deadly earthquake.

« Rates Update: F&P responds to PGG with sharp rate hikes

Rates Update: ANZ lowers rates for second time in two weeks »

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Comments from our readers

On 1 March 2011 at 2:53 pm Christopher said:

Think there is a bit of margin growth being undertaken by the bank under the pretext of a possible reduction in the OCR.Can only assume that they are now able to source overseas funding very cheaply. All very well the economists and some business people calling for a half % reduction in the OCR - the obverse of that coin is all the oldies relying on TD's to pay their bills are already subsidising the economy in a big way by having to accept pathetic rates.

On 4 March 2011 at 10:36 am Ron Palmer said:

Agree with Christopher - The Oldies get slugged again. Down with the OCR means down with the $ on foreign exchange and up goes the cost of living. The young have very little to bleat about.The oldies could never get mortgage money at 7% etc and they were happy to walk or catch public transport. Cars, carpets, refrigerators etc were not priority.