KEY POINTS:
My retired mother-in-law has asked me where she should put some spare money. This forced me to look widely across the market and think carefully about what is safe. The last thing I want to do is lose her money.
The following is not for everyone because everyone
has a different situation and risk appetite. It is aimed at retired investors with some money to spare who want a very safe bet.
Best call account
The best call rates on offer from a AA-rated (or better) bank are from Kiwibank, which has an AA- rating, Westpac (AA+), and Dutch-owned online bank RaboPlus (AAA).
Recommendation: RaboPlus is the highest-rated bank with the best rate online (8.35 per cent). Luckily my mother-in-law is an online whiz, but even for online virgins, it's a lot easier than it used to be and Rapoplus takes phone calls.Best deposit rate up to one year
It pays to watch rates tables for this one. Banks offer specials all the time and the length of the term is important, depending on your needs. The highest rate offered by a AA-rated bank is Kiwibank's special for five months at 8.85 per cent with a minimum of $10,000 and interest paid on maturity. ASB's best rate is 8.7 per cent for nine months with a minimum of $10,000 and interest paid on maturity. ANZ's best rate is 8.5 per cent for 100 days, while National Bank's is 8.6 per cent and Westpac's is 8.5 per cent for six months.
Recommendation: Kiwibank's 8.8 per cent for five months is the best rate from a AA-rated bank, just edging out ASB's 8.7 per cent for nine months. This is a bit of a toss-up depending on your view on interest rates.
If you think, as most economists and the Reserve Bank do, that interest rates will fall substantially over the next six to 12 months, then the nine-month deal may be more sensible. My view is that interest rates might not fall until quite late in the year and by not much because we have an inflation problem that needs fixing.
Best deposit rate over one year
The outlook for interest rates is crucial here. If you believe interest rates will fall sharply over the next year or two then invest for a longer term at the current high rates. If you think interest rates are likely to stay high, you can be more comfortable staying closer to a one-year term.
Recommendation: BNZ's 18-month rate of 8.55 per cent looks attractive if you want a AA-rated investment and you believe interest rates are going to fall. If you're relaxed about slightly more risk, are happy to invest over a longer term and believe interest rates will fall, then the BBB- rated Marac Finance's five-year bonds look good at 10.5 per cent. The offer closes on July 18.
Bernard Hickey is managing editor of www.interest.co.nz, a website for investors and borrowers wanting free, independent news and information about interest rates, banks, finance companies and the economy.
