What Is a Term Deposit?
A term deposit is a fixed-term savings product where you lock your money away with a bank or non-bank deposit taker for a set period — typically anywhere from 30 days to 5 years — in exchange for a guaranteed interest rate. The key features are: your principal is protected, the interest rate is fixed for the term, and early withdrawal usually incurs a penalty (typically a reduction in the interest rate earned).
Unlike a savings account, where the interest rate can change at any time, a term deposit locks in your rate for the entire term. This makes them particularly attractive when rates are high, as you can lock in a good rate before the RBNZ cuts the OCR and rates fall. Term deposits are popular with retirees, conservative investors, and anyone saving towards a specific goal who doesn't want to take investment risk.
How Term Deposit Rates Are Set
NZ term deposit rates are primarily driven by the Reserve Bank of New Zealand's Official Cash Rate (OCR). When the RBNZ raises the OCR to fight inflation, banks typically increase both lending rates (mortgages) and deposit rates (term deposits). When the OCR is cut, term deposit rates tend to fall. Banks also consider their own funding needs, competition from other institutions, and global wholesale funding costs when setting rates.
Non-bank deposit takers (such as finance companies) often offer higher rates than the banks because they face a higher cost of funding and need to attract deposits to fund their lending. While non-bank deposits carry slightly more risk than major bank deposits, they are regulated by the RBNZ and covered by the depositor protection scheme up to $100,000 per institution.
Current Term Deposit Rates NZ 2026
Bank / Institution30 Days3 Months6 Months1 Year2 Years
ANZ~3.50%~4.20%~4.60%~5.00%~4.80%
ASB~3.50%~4.25%~4.65%~5.05%~4.85%
BNZ~3.45%~4.20%~4.60%~5.00%~4.80%
Westpac~3.50%~4.30%~4.70%~5.10%~4.90%
Kiwibank~3.40%~4.20%~4.65%~5.05%~4.85%
The Co-op Bank~3.60%~4.35%~4.75%~5.15%~4.95%
SBS Bank~3.55%~4.30%~4.70%~5.15%~4.95%
Rates are indicative and subject to change. Check interest.co.nz for daily updated figures before investing.
Minimum Deposit Amounts
Most NZ banks require a minimum deposit of $1,000 for a term deposit, though some require $5,000. Non-bank deposit takers may have higher minimums, such as $5,000 or $10,000. Make sure you meet the minimum before comparing rates across institutions. Some banks also offer higher "special" rates for larger deposits — for example, a premium rate for balances over $100,000 — so it's worth asking your bank directly if you have a significant sum to invest.
How to Get a Better Term Deposit Rate
The advertised "carded" rates at major banks are not always the best available. Here are proven strategies to get a higher rate:
Negotiate directly – Call your bank and ask if they can offer a rate above the carded rate, especially if you have a large sum or are rolling over from a previous term deposit.
Use a broker – Deposit brokers like NZ Funds or SuperLife can sometimes access rates not available to retail customers.
Check non-bank deposit takers – Finance companies like Heartland Bank often offer rates 0.20–0.50% above the big banks.
Ladder your deposits – Rather than locking everything in one term, split across multiple terms so you have regular maturity dates and can take advantage of rate movements.
Watch for specials – Banks sometimes run limited-time promotional rates. interest.co.nz and Canstar list these when they appear.
Tax on Term Deposit Interest
Interest earned on term deposits is taxable income in New Zealand. Banks deduct Resident Withholding Tax (RWT) at source, at either 10.5%, 17.5%, 30%, or 33% depending on your tax rate. You need to provide your correct RWT rate to your bank when opening the term deposit — if you don't, the bank defaults to 33%. If you've been charged too much RWT, you can claim it back in your annual income tax return via IRD.
Term Deposit vs Other Savings Options
Term deposits aren't the only place to park your cash. Here's how they compare to alternatives: a standard savings account offers more flexibility but usually lower rates; KiwiSaver offers higher potential returns but locks your money until retirement (or first home purchase); government bonds offer similar security to term deposits with potentially different rate structures; and managed funds offer higher potential returns but with investment risk. For money you need in 1–5 years that you don't want to put at risk, term deposits remain one of the best options available to NZ savers.
Frequently asked questions
What is the best term deposit rate available in NZ right now?
The best term deposit rates in NZ change daily. As of 2026, the most competitive rates for standard retail customers are generally found at smaller banks like The Co-operative Bank, SBS Bank, and TSB, as well as non-bank deposit takers like Heartland Bank. For the most current rates across all providers, visit interest.co.nz's term deposit comparison page, which aggregates rates from banks and non-bank deposit takers updated in real time. Rates for a 1-year term from the most competitive institutions have been in the 5.00–5.40% range in 2026.
Is my money safe in a term deposit?
Yes, for deposits with registered banks in New Zealand. Term deposits at RBNZ-registered banks are protected under NZ's depositor protection regime up to $100,000 per depositor per institution. Your principal is also contractually guaranteed by the bank — unlike a managed fund or share portfolio, the bank cannot return less than your original deposit. Non-bank deposit takers (finance companies) carry slightly more risk but are still regulated. Diversifying across multiple institutions if you have more than $100,000 is a prudent strategy.
Can I withdraw a term deposit early in NZ?
Most NZ banks allow early withdrawal from a term deposit but will charge a break penalty. The typical penalty is a reduction in the interest rate earned — for example, if you earned 5.00% for the full term, an early break might reduce this to 3.00% for the period you held it. Some institutions may not allow early withdrawal at all, so always check the terms before investing. If there is a chance you'll need the funds before maturity, consider a shorter term or a notice saver account instead, which offers more flexibility.
How is term deposit interest paid in NZ?
Interest payment frequency varies by bank and term. For shorter terms (under 12 months), interest is typically paid at maturity along with your principal. For longer terms, you may have the option to receive interest monthly, quarterly, or annually, which can be useful for those using term deposits as a source of income. Monthly interest payments result in slightly lower effective rates than if interest were compounded at maturity, so factor this into your comparisons when choosing between payment options.
What is the difference between a term deposit and a notice saver?
A term deposit locks your money for a fixed period with a guaranteed rate. A notice saver allows you to access your money by giving notice to the bank (typically 32–90 days). Notice savers usually offer higher rates than instant-access savings accounts but lower rates than term deposits. They suit people who want some flexibility but are happy to wait a few weeks to access their funds. Kiwibank, ASB, and BNZ all offer notice saver products. If you're unsure how long you can commit your funds, a notice saver may be a better fit than a term deposit.
Should I lock in a long-term or short-term deposit?
This depends on your view of where interest rates are heading and how long you can commit your funds. When rates are expected to fall (as they have been following the RBNZ OCR reductions since late 2024), locking in a longer term deposit secures the current higher rate before it disappears. When rates are expected to rise, a shorter term allows you to reinvest at higher rates sooner. Most financial advisers recommend a laddering strategy — splitting your deposit across multiple terms — to balance liquidity and rate optimisation without having to guess the direction of the market.
Do I need to pay tax on term deposit interest in NZ?
Yes. All term deposit interest is taxable income in New Zealand. Your bank will deduct Resident Withholding Tax (RWT) at source before paying interest into your account. The correct RWT rate depends on your income: 10.5% if your income is under $14,000; 17.5% for $14,001–$48,000; 30% for $48,001–$70,000; and 33% if your income exceeds $70,000. Make sure you advise your bank of the correct rate when opening the term deposit to avoid overpaying tax. Your after-tax return is what matters most when comparing term deposit rates.
