The ability to lock away money in an investment that pays a regular amount of interest has always held a certain appeal, typically among the more conservative investors seeking safe haven from the stormy seas of the stock market. Term deposits are also a useful vehicle for those saving for a long-term goal – real estate purchase, holiday or whatever – because of the added benefit that locking your money away removes the temptation to spend.
In today’s low-rate environment, it’s important to get the best deal so your money is working as hard as it can.
Each year CANSTAR research and rate term deposits on offer by New Zealand financial institutions. This year we have assessed the price and features of term deposits offered by nine financial institutions to determine which institution is offering outstanding value in this area.
This year, for the third time in four years, Kiwibank has taken the award for Bank of the Year –Term Deposits.
CANSTAR caught up with Kiwibank Communications Manager – Bruce Thompson, for a quick Q&A
Q: Term deposits seem to have enduring popularity. Demographically though, what does a “typical” term deposit investor look like?
A: A typical term deposit customer is often near or at retirement looking for a good rate , however there are multiple reasons why people choose to lock away funds, including younger people saving for a deposit for a house. We also believe there is a higher level of confidence in bank deposits than some alternative investment options.
Q: The official cash rate rose several times last year – has this had an impact on the amount of money invested in term deposits – either savers locking in a good TD rate or conversely heading to an at call account in the expectation that rates will continue to rise?
A: We do see savers who are wanting to lock in a good TD rate and believe there was probably some uncertainty as to how many rate rises there would be as the year progressed.
Q: Having a full online application process and maturity reminder via email suggests more and more customers are transacting online. Is this the case?
A: Yes that is the case, we’ve seen a steady increase in online applications.
Q: As well as a competitive interest rate, what are some other important features that investors should look for in a term deposit?
Rates are a big driver in the term deposit space. However the value of customer loyalty and the development of a long-term relationship with customers are also very important. As customers move from paying a mortgage to building savings they will look to the history of their relationship with a bank. Customer service and probably New Zealand ownership influence decisions about where to invest savings.