Term deposit rates might have a bit further to increase, but savers should ask themselves whether it is really the right place to put their money.<\/p>\n
As interest rates have risen, term deposits rates have inched up. In October last year, the average two-year rate was just over 3.5 percent, and the average five-year rate was just under 4 percent. Now, those rates at 4.17 percent and 4.66 percent, respectively.<\/p>\n
Shorter terms have moved less. The six-month rate has not moved according to the Reserve Bank data, while the one-year rate has picked up from 3.5 percent to 4 percent.<\/p>\n
Over that time, the official cash rate has dropped from 2.5 percent to 2.25 percent and then lifted to 2.5 percent again. It will be reviewed next month.<\/p>\n
BNZ adjusted its term deposit rates on Friday, moving its one-year rate to 4.05 percent and its 30-day rate to 1.85.<\/p>\n
Bank of China lifted its two-year rate to 4.3 percent.<\/p>\n
Squirrel chief executive David Cunningham said he expected the interest rate on short terms deposits to increase if the official cash rate did.<\/p>\n
Chris Tennent-Brown, senior economist at ASB, said it was a difficult environment to predict.<\/p>\n
“The underlying swap rates have been pretty volatile and US long-term interest rates have been pretty volatile as well.”<\/p>\n
He said if the Reserve Bank went ahead with lifting the official cash rate as expected this year, that would flow through to higher short-term deposit rates and shorter-term mortgages.<\/p>\n
Some of the more popular rates were likely to move, he said, but the interest rates offered on long-term term deposits were likely to be more affected by inflation expectations and long-term rates here and overseas.<\/p>\n
“There are a lot of moving parts … we’ve got new things we wouldn’t have been thinking about a week ago with the US Treasury Secretary talking about changes to the duration of the US mortgage market to try to get longer-term rates down there.<\/p>\n
“People’s fear of inflation is bouncing around as much as oil prices are. It’s going to be an interesting six months.”<\/p>\n
He said people thinking about putting money into a term deposit needed to be sure it was the right option.<\/p>\n
“If you don’t need the money for five or 10 years it’s probably worth having some conversations about whether there are better places to be than in a term deposit. Growth and inflation protection are key there. Inflation is still running ahead of what those popular short-term deposit rates are. So working out a strategy to beat that is really important.<\/p>\n
“But if it’s money for a deposit on a house that you’re planning on buying over the next six months, then you just need that liquidity.”<\/p>\n