Low TD rates help bank profits
Strong flows of retail money into bank term deposits has reduced the banks’ incentive to pay higher interest rates, the Reserve Bank says.
Friday, June 20th 2014, 7:12AM
A number of commentators have noted in recent months that term deposit rates haven’t moved, while the OCR and home loan rates, particularly floating ones, rise.
The RBNZ says, in its recent Monetary Policy Statement that that term deposits make up more than half of total bank funding, and are a key driver to lower funding costs for banks.
“For example, despite rising six-month bank bill rate as the market anticipates increases in the OCR, the average six-month term deposit rate has remained steady for the past year.”
This shows up as a reduction of about 100 basis points in the term deposit funding spread over that time.
Since last week’s OCR increase a number of banks have increased term deposit rates.
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