In November another Reserve Bank cash rate cut occured, and since then Mozo has counted an astounding 785 reductions to term deposits. The average cut was 13.7 basis points and the average rate for a one-year term fell 11 basis points to 0.65% p.a.*
Interest rates haven’t been all that rosey for savers in 2020. Whether you store your cash in a term deposit or savings account, economic uncertainty has led to consistent cuts across the board. The traditional approach to this kind of instability would be to bet on a term deposit. This option provides a fixed rate for as long as you set the term, helping you avoid rate reductions (and increases, on the negative flipside).The catch is you’ve got to get while the gettin's good. Right now, what you’ll get for an average one-year term deposit is 0.79% interest rate, according to Mozo’s database. Compared to 2014’s one-year term average of 3.41%, that interest rate doesn’t feel quite so good.Unfortunately, things really don’t pick up if you’re willing to stick it out for a longer term. As you can see in the graph below, savers were once upon a time incentivised with a higher rate to keep their cash locked up for longer periods.
As predicted, cuts to term deposit interest rates started to slow down in September. Mozo recorded more cuts to savings rates than to term deposits last month. But with talk of a possible rate cut at the next Reserve Bank monthly meeting, there may yet be more reductions to come. So if you’re looking to lock away some cash before rates plummet any further, now is the time to get switching.
Interest rates for term deposits have felt a bit like a free falling roller coaster for the past few months. The good news is these relentless cuts might actually be slowing down. Or in other words, we might be coming to the end of the ride.
2020 isn’t shaping up to be a great year for Aussie savers. Plummeting rates have left savings accounts across the board looking worse for wear, and term deposits haven’t been spared all that much either.
If you were hoping for a dramatic change in term deposits, then you’ll be sorely disappointed. Around 70 of the 86 financial providers Mozo tracks dropped interest rates in July and our experts predict cuts will continue throughout August. What you might be surprised to hear is that even after all that, there are still perks to locking your money away in a term.