Competition among the banks to attract people's savings is heating up with another two major banks tweaking deposit rates.

Kiwibank this morning announced it would increase its longer term deposit rates by between 0.15 and 0.25 per cent for people who invest at least $10,000.

While Westpac has released a special two year term deposit rate of 3.7 per cent - an increase of 0.45 percentage points for investments of at least $10,000.

The moves follow increases by BNZ, ASB and ANZ last week.


BNZ is offering a 4 per cent two year term deposit rate special which finishes at the end of this week for investments of at least $5000.

David Chaston, publisher of rate tracking website said the last time deposit rates rose was in mid 2014.

But it was a short-lived rate rise which had stopped by the end of 2014 and deposit rates have headed downwards since then.

"Rates have never fallen this far. We are bumping off record lows," he said.

But the tide could now be turning in favour of savers with New Zealand's banks under pressure to increase their deposits to fund borrowing and reduce the amount of money they need to borrow internationally.

Chaston said it was hard to forecast where deposit rates would go to as many of the drivers were factors from outside of New Zealand.

But he expected them to rise a bit more yet.

"They are not going to go back up to 8 per cent rates or even 6 per cent rates but it wouldn't surprise me if they were at the 5 per cent level at the longer end next year."


Chaston said the banks were trying to encourage savers to lock their money in for longer but that was a challenge as 80 per cent of New Zealanders' money was locked in for less than a year and much of the money was sitting in on-call accounts.

"Getting people to move will be hard," he predicted.

Jose George, managing director of Canstar New Zealand, said people needed to take their own position into account before deciding to lock in their money.

"It really depends on what you are going to do with the money," he said.

He cautioned people against locking their money in for several years when rates were likely to rise further and suggested people consider splitting their savings into different timeframes to smooth the risk of being locked into a lower rate.

At the same time as increasing deposit rates banks have also moved their fixed mortgage rates up for longer terms.


Canstar figures show in the week to November 25 the average increase for a five year fixed term mortgages was 0.28 percentage points with the average rate now at 5.35 per cent.

The average rate for a two year fixed term mortgage was now 4.65 per cent.

George said while it broadly made sense to lock your mortgage in for as long as possible at the moment people still needed to consider their personal situation and factor in the break costs if they would need to change the mortgage in less time.

He said it made more sense to split mortgages into several fixed term loan periods to allow for flexibility.

"The bottom line is there is no one solution for everybody."

George noted that rising fixed mortgage rates could also make floating rates more attractive in the future as came closer together.


Fixed mortgages rates have generally been much cheaper than floating rates in recent years.

The rate changes fly in the face of the recent official cash rate cut in which the Reserve Bank governor cut the rate to a record low of 1.75 per cent.

George said more and more it was seeing the banks and other financiers making separate decisions to the official cash rate.

"Their rates are more about the cost of funding. They are more impacted by what is happening internationally rather than locally."

Two year term deposit rates
ANZ 3.5 per cent for over $10,000
ASB 3.65 per cent for over $10,000
BNZ 4 per cent for over $5,000
Westpac 3.7 per cent for over $10,000
Kiwibank 3.4 per cent for over $10,000