How Lower Interest Rates Could Reshape Kiwi Savings

The Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) again in May, bringing it down to 3.25%—its lowest level since mid-2022. With further cuts forecast by early 2026, this signals a turning point for Kiwi households.

For homeowners, lower interest rates may bring welcome breathing room. But for savers—especially those relying on term deposits or cash savings—the returns are shrinking. As we move into a lower-rate environment, it’s a good time to think about how these shifts affect your short- and long-term financial goals.

Banks have already begun adjusting term deposit and savings rates downward. If you’ve been relying on cash in the bank for your financial cushion, now might be a good time to rethink how and why you save.

Banks Are Already Moving

• Several major banks, including ASB, BNZ and Westpac, reduced their advertised term deposit rates across all durations in Q2 2025.
• One-year term deposits, which offered around 5.4% in early 2024, have now dropped below 4.5% in most cases.
• Online savings accounts and “notice saver” products have also reduced yields, some below 3.5%.

Source: Interest.co.nz, bank product comparisons as of June 2024

For an up to date list of current Term Deposit rates see here
 
❝ What used to feel like a solid return on cash is starting to erode. We’re hearing from a lot of members who are wondering what their options are. ❞

— From a recent public Sorted.org.nz webinar

Who Feels It Most

These changes are being felt most by:

• Retirees relying on interest income
• Conservative savers holding money in short-term deposits
• People with large emergency funds sitting in standard savings accounts
• Anyone planning short-to-medium-term goals like travel or home deposits

A Shift In Thinking For Savers

There is less reward for cash savings as term deposits that paid 5–6% in early 2024 are trending lower and its prompting many to ask questions like:

“How much cash should I keep in the bank?”
“Are term deposits still worth it?”
“Should I split my savings into different ‘buckets’ based on goals?”

While the answers vary from person to person, there’s one consistent theme emerging: it’s no longer enough to set and forget. It’s important to revisit your savings structure.

Many are revisiting how they:

• Structure emergency savings
• Use cash for near-term goals (1–3 years)
• Contribute to long-term accounts like KiwiSaver or investment funds

This requires more emphasis on goals or more specifically the need for savers to match their strategies with clearer timelines—short term, medium, or long.

One way is to think of your savings in three parts:

• Emergency buffer – accessible, no risk, less return
• Short-term goals – maybe a blend of flexibility + moderate returns
• Long-term goals – growth-focused, likely outside of cash
  

These aren't new ideas and the concept of Buckets has been around for a very long time but everyone's situation is different, but goal-based thinking can help frame what belongs where.

Checklist: Thinking Through Your Savings Plan

Use these questions as a starting point to reflect on your savings:

☐  Do I have a dedicated emergency fund (3–6 months of expenses)?

☐  Am I relying on term deposits for income—and are they still delivering?

☐  Could I structure my savings for short-, mid-, and long-term goals separately?

☐  Am I clear on what’s in cash vs. what’s invested elsewhere?

Did You Know?

Sorted.org.nz has a tool to help map out different savings buckets. It’s a great starting point for goal-based planning. Find out more here.

Written by: Alan Sharpe

Alan is a key member of the HealthCarePlus leadership team. With over 30 years experience in marketing and customer service roles he is a passionate advocate for the union movement and HealthCarePlus’s mission to create real, lasting value for their members