Banks innovate in short-term rates

Rabobank via RaboDirect drove the innovation with the launch of BankaRate where it offered special interest rates across all terms. The best rate was the 6% on six-month deposits for a minimum amount of $5,000. The offer was snapped up within few hours of opening, prompting the bank to reintroduce but with minimum amount of $20,000 and then to $25,000.

The BankaRate specials attracted investors towards only short-term deposits with longer-term attracting very minimal deposits. For example, the 6.70% on four-year deposits with minimum amount of $5,000 managed to get subscription for just 6% of the total amount the bank put on offer.

Kiwibank quickly followed RaboDirect with its own BookaRate on one and two-year deposits. At 5.50% on one-year deposits, the specials are offering 20 basis points over Kiwibank's regular rate of 5.30%.

Finance companies were active last week with a few making downward moves to interest rates while Finance Direct was an exception when it increased across maturities starting from six months to five years.