CANSTAR releases term deposit ratings 2016

CANSTAR releases its 2016 Term Deposit Award report today, researching and rating the term deposit products offered by nine financial institutions.

With the official cash rate declining by 100 basis points over the past twelve months, finding a good return on your savings is more important than ever. Each year CANSTAR researches and rates the financial institutions offering term deposits in the New Zealand marketplace,  assessing both the interest rates on offer as well as the features provided.

Making it a hat trick this year, Kiwibank has achieved the Bank of the Year – Term Deposits Award for 2016. And despite the low official cash rate, Kiwibank advises that term deposit products remain popular with customers.

“Other investments carry risk and some people prefer the comfort of a set rate even if it’s lower than they would have received previously,” said a Kiwibank spokesperson.

“We get about a third of our applications online (now) and hope that this continues to increase as customers become aware of how easy it is to open online.”

What interest rate can term deposit customers expect?

Term deposit interest rates have followed the official cash rate down over the past twelve months, with current minimum, maximum and average rates on 1, 2 and 5-year term deposits as follows:

Term Minimum Maximum Average
1 year 3.00% 3.75% 3.48%
2 years 3.25% 3.80% 3.58%
3 years 3.50% 4.00% 3.84%

Source: Canstar.co.nz. Rates at 2/2/16, based on products on Canstar database.

Interestingly, maximum and average rates on 2 and 5-year term deposits have dropped by significantly more than the cut in official cash rate, indicating that our financial institutions are possibly seeing further official cash rate cuts ahead.

Think outside the term

A quick reminder: savers should think beyond the standard 12 month term when shopping around for a good return on their savings. In our low interest rate environment, it’s challenging enough to find a good return on your money so be prepared to be flexible on the amount of time that you invest for – and be aware that a longer term isn’t necessarily better.

Often savers might assume that the longer they invest their money for, the higher the return they’ll receive. That isn’t always the case though. Currently, for example, Kiwibank’s 6 month term deposit rate of 3.50% (minimum deposit $10,000) is higher than its 9 month rate, at 3.45%.

“We always like to have a good special in the market for our customers,” said Kiwibank’s spokesperson.

“We try to offer competitive rates across our card though so customers rolling onto the same term will still get a competitive rate.

“It’s always important to consider your investment options.  Some of our customers will still choose a longer term even if the rate is the same (or even slightly lower) than a shorter term as there is still some uncertainty in the market with rates having decreased over the past year.  Customers might choose longer terms in the hope of avoiding rate cuts.”

Why Kiwibank is a winner

It is the combination of superior interest rates across many terms and account features that have given Kiwibank the winning edge for the third successive year. Some of the features include:

  • Ability to transfer a term deposit to another institution after the maturity date without paying any penalty.
  • Ability to withdraw up to 20% of the principal at any time during the term with no penalty. Withdrawals of more than 20% attract a penalty of 0.02%.
  • Kiwibank holds an institution credit rating of A+.
  • Kiwibank offers a full online application process for new and existing customers.

Kiwibank has now won CANSTAR’s Term Deposit Award four out of the five times it has been presented, including the past three years in a row.

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