April term deposits update

Despite the Reserve Bank having made no further cuts to the cash rate this year, interest rates for term deposits are still very much on a downward spiral.

In March our research team counted a total of 32 cuts to term deposits in the Mozo database. On top of that the average interest rate for a $25,000 deposit for a 1-year term fell from 0.56% p.a. to 0.53% p.a.* Interestingly though, there were also some slight increases from a few banks.

Judo Bank & Firstmac increase rates

Going against the grain amidst a slew of cuts, Judo Bank and Firstmac actually increased term deposit interest rates in March. In fact, Firstmac increased some rates by as much as 55 basis points! 

Goldfields Money also shook things up a bit by increasing some rates, while at the same time decreasing others. While upping the interest rate for three, six, nine month and one year terms by as much as 40 basis points, it also lowered rates for its four and five month and two year terms by between 15 and 20 basis points.

Staying on top of the game

Speaking of Judo Bank, it is still firmly holding the top spots for a number of term deposits in the Mozo database*. Its current rates are as follows:

• 0.98% p.a. for a 3 month term
• 0.99% p.a. for a 6 month term
• 0.99% p.a. for a 9 month term
• 1.09% p.a. for a 1 year term
• 1.20% p.a. for a 2 year term
• 1.15% p.a. for a 3 year term
• 1.10% p.a. for a 4 year term
• 1.20% p.a. for a 5 year term

Judo Bank mostly shares the limelight with BankVic. A B Corp certified mutual bank, BankVic offers the most competitive interest rate in the Mozo database for four, five, seven, eight, ten and eleven month terms. The interest rate for these terms is currently 0.85% p.a. and you can deposit between $5,000 and $100,000.

Didn't find the term deposit you were after? Scroll up for more options and to have a look at what interest rates are available right now.

Read the full April market update for term deposits here.

Updated by: Tara McCabe,  31 March 2021

*Average interest rates calculated using information available in the Mozo database, correct as of 31 March 2021.

What is a term deposit?

Term deposits are a relatively low-risk investment option offered by many Australian banks. Term deposits enable you to earn interest on a lump sum of money at a fixed interest rate for a locked-in period of time.

How to find the best term deposit for you

Before taking out a term deposit, you not only need to compare the range of interest rates available, but also carefully consider the best investment term for you. This is because there are penalties for withdrawing your money early with a term deposit.  

How do I compare term deposits? 

Mozo makes term deposits comparison easy. In the table above, we’ve listed out the key features you’ll want to know about when comparing the best term deposit options for you. 

• The interest rate column lists out the interest rate you’ll earn for the rate term outlined. You will receive this rate for the entire term deposit fixed period. 

• The minimum deposit column outlines the amount of money you’ll need to have to open a term deposit with the provider listed. With term deposits this minimum amount can range from $500 up to $250,000. 

• All term deposit providers that are listed on our site are covered under the Australian government deposit guarantee scheme up to $250,000. 

Is now a good time to invest in a term deposit? 

Right now due to covid:19 and the current economic crisis, a term deposit is considered to be one of the safest investment options for Australians with cash. This is because interest rates on term deposits are fixed and your money is protected under the Government Deposit Guarantee for balances up to $250,000.

Which banks have the best term deposit rates in Australia?

There is no one Australian bank that has the best term deposit rates for every investment term. This is why it’s so important to compare term deposits based on your own individual circumstances. The term deposit interest rate you’ll be able to get will depend on:

• Your deposit amount

• Investment term 

Online banks and traditional bricks and mortar banks offer term deposits to customers and usually these days account set up and management can be done from the comfort of your couch via internet banking or banking app.

Term deposit key features to look for

To make sure that you’ll get the best possible return on your investment, the main features to compare term deposits on include:

• Interest rate. The higher the interest rate the better. Term deposit interest rates are fixed so no matter what happens in the market, the rate that you locked into at the start of your investment will remain for the entire term.

• Interest payments. If you choose a short term deposit usually interest is paid at the end of the term. For longer terms, interest is usually paid annually.    

• Investment term. These range anywhere from 1 month to 5 years depending on the financial institution. Most banks have a range of terms to choose from.

• Minimum deposit. All term deposits require a minimum lump sum investment. $1000 is generally the minimum investment needed to open a term deposit.

• Automatic rollover at maturity. Your banking provider will notify you close to the end date of the term and list out the options for what you can do at maturity. If you do nothing, your money could automatically get rolled over to a new term

Is money safe in a term deposit? 

Term deposits are covered under the Australian Government’s financial claims scheme. The Australian Government guarantees term deposits of up to $250,000 with Authorised Deposit-taking Institutions (ADIs) such as your bank, credit union or building society. All term deposit providers listed on Mozo are ADIs.

What are the pros of term deposits?

• Bad spending habits and temptations are restricted as your savings are untouchable.

• A fixed interest rate provides security on your investment.

• No need to stress if Reserve Bank rates fall.

• Financial goals can be reached without the risks associated with other investments like shares and property.

• There are usually no set up or account management fees attached to term deposit accounts.

What are the cons of term deposits?

• A term deposit can't be topped up until it matures.

• As tempting as it may be, there's no dipping into the deposit until the end of the term.

• Penalty fees apply if you have to withdraw your savings early.

• If interest rates rise during the term you won’t benefit.

Term Deposits vs Savings Accounts

It's the age old question… Is it best for those hard earned savings to be invested in a term deposit or in a savings account? Let’s review them side by side.

• If you're a 'commitment phobe' then a long term deposit may not be for you. Therefore, opt for a high interest savings account which is much more flexible and accessible.

• Penalties apply if you withdraw money from a term deposit before the term has ended. There are no fees for taking out money from a savings account, though you may get reduced interest for a period of time when you withdraw depending on the account’s conditions. 

• You can't make additional payments to your term deposit. Savings accounts can be topped up when you like i.e. daily, weekly, monthly etc

• Term deposit rates are fixed whereas the bank has the potential to change interest rates on savings accounts, including offering less or more interest depending on what’s happening in the market. 

• Guaranteed rate of return. With a term deposit, you are guaranteed to receive the interest rate that you locked in when you opened your account for the full term. Savings accounts are based on variable interest rates which means that your interest earned while you have money in the account can also change.

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