SBS Bank bumps year deposit rate up to 6 percent

A New Zealand bank has edged ahead of the market with a 6 percent 12-month term deposit rate. 

SBS Bank's new year deposit rate is now the highest in the market and is the highest on offer since November 2008. 

SBS Bank CEO Mark McLean said it is 0.5 percent above the highest advertised 12-month rate offered at New Zealand's other major banks. 

"We are proud to pass on another meaningful term deposit rate increase of 90 basis points and once again offer the most competitive rate in-market for our most popular 12-month term," McLean said. 

 "As a mutual, we are always looking to provide additional benefits to our members and one of the ways we achieve this, alongside our great service, is through competitive pricing of our products.

"Offering this market-leading rate represents SBS Bank’s commitment to be competitive and support savers who have weathered low returns over recent years." 

SBS Bank bumps year deposit rate up to 6 percent
Photo credit: SBS Bank

It comes after ASB made the unusual move of changing its interest rate offering ahead of the inflation figures on Wednesday. 

On Monday, ASB made several changes to its interest rate offerings for the start of 2023 bumping its short-term rates up while dropping the longer-term options. 

The bank has added 34 basis points to its six-month fixed rate taking it to 6.84 percent. It's the same as its one-year fixed rate which increased 30 basis points also to 6.84 percent. 

The bank's 18-month and two-year fixed rates also increased 15 and five basis points respectively, taking both to 6.79 percent. 

But the bank cut its three-year mortgage rate, down 15 basis points, along with its four and five-year rates down 40 and 50 basis points respectively. 

The changes bring the three-year rate to 6.69 percent, its four-year rate to 6.59 percent and its five-year rate to 6.49 percent. 

ASB is the only major New Zealand bank to offer a lower rate for its five-year option compared with its six-month option. 

Infometrics principal economist Brad Olsen said the increases to the short-term rates are likely in anticipation of the Reserve Bank of New Zealand (RBNZ) increasing the Official Cash Rate in February to dampen inflation. 

"There's still an expectation, and a pretty strong expectation, the Reserve Bank is going to have to continue to raise interest rates in the first few months of this year," Olsen said. 

"Inflation is still likely to be hot, food price inflation is running at a 32-year high, rents are elevated… fuel has come back but we're still in the grips of high inflation."

But he said across the world, particularly in the United States, inflation looks like it may have peaked, which could mean while the OCR will increase in the short term, it might start coming down in the longer term. Olsen added the increasing likelihood of a recession will also impact whether the OCR continues to rise. 

"In my mind, that increase to the one-year fixed term just reflects the fact we are likely to see interest rates rise. The cuts towards the longer term, I think reflect that we've seen wholesale bond rates reduce quite a bit already in 2023. 

"And of course, if wholesale bonds are getting cheaper then the banks themselves aren't having to pay as much for their longer-term lending so they can pass some of that on."