There is currently some totally irrational term deposit pricing out there.
One-year term deposits are paying 4.50% and banks are lending out at 5.50%. Wholesale rates are at 2.90%; so term deposits are being priced at least 1.60% above where they would usually be priced.
From my perspective it appears to be driven by Kiwibank. They need strong retail deposit growth to fund their mortgage book. Ironically they could end up forcing even short-term mortgage rates higher.
Wow – who would have thought Kiwibank would replace the RBNZ in determining monetary policy?
If short-term rates do go up, and it is looking like they might, this is not reason to panic.
If you can, I’d lock rates in now as they certainly won’t go lower. But rates generally are going to stay low for quite some time.
