Westpac has just launched an astonishing 1 year term deposit rate this morning: 6.80%. They’re not even waiting for the RBA announcement this afternoon.
A 1 year rate of 6.8% is an enormous rate, bigger than any 1 year or even 2 year term deposit rate in the market. Yesterday the best 1 year rate around was an online special from Rural Bank of 6.25%, and the best the Big 4 offered was 5.5%. You couldn’t get any more than 6.5% even if you locked your money away for 2 years!
It’s true that term deposit rates have been on the rise for a while. Even before today’s announcement, the average 1 year TD rate was 1% higher than 12 months ago, even though the Reserve Bank rate is still much lower. But up to now, it’s been the smaller players leading the charge on Term Deposits rates: yesterday’s leading 1 year deposit rates came from Rural Bank, AMP, Bank of Queensland and Bendigo. That’s primarily because they’ve struggled to fund their lending compared to the Big Banks, and therefore need to attract more deposits. So the fact that today’s aggressive move has come from Westpac is a real eye-opener.
We’ve been blogging here at Mozo for a while about the emerging savings account rate wars. Now the conflict is spreading. The other players will need to sharpen up their own term deposit rates in order to keep money coming in. This is a great time to be saving!
But we have to wonder, at what cost to loan rates? Last month, Commbank CEO Ralph Norris was blaming higher term deposit rates as one of the things driving up home loan funding costs, and one of the reasons why he wouldn’t rule out increasing variable home loan rates by more than the RBA increases. This certainly isn’t going to help homeowners!
Compare term deposits with mozo.com.au