Another month gone, another round of term deposit interest rate changes to report on. In April, Mozo's research team counted at least one cut from 18 different term deposit providers. The average interest rate for a $25,000, 1-year term deposit didn't change much, dropping slightly from 0.53% p.a. to 0.52% p.a.*
In light of the avalanche of rate cuts over the past year, term deposits have become an increasingly attractive option to savers wanting more certainty over their interest earnings.If you’re one such Australian and you’re eager to secure a competitive rate over the next few months or years, Mozo has some exciting news. Today we revealed the best term deposits for this year in the 2021 Mozo Experts Choice Awards. As part of these awards, Mozo’s expert judges analysed 73 term deposits across a range of investment terms from one month up to five years, in order to determine the best of the bunch. Neobank Judo Bank was a standout winner, taking home a Mozo Experts Choice Award for best Term Deposit for the second year in a row. It carries this dual honor alongside customer-owned banks like UniBank, Firefighters Mutual Bank and Teachers Mutual bank.
In December last year, Mozo counted a huge 785 term deposit interest rate cuts. This January there have been 382 from 36 providers. So while term deposit interest rates are still heading downwards, it looks like banks might have started to ease up on the cuts.
Pensioners are continuing to draw the short straw when it comes to deposits, according to new Mozo analysis. Mozo found that on a balance of $53,000, the average pensioner account rate now sits at a mere 0.62%, which is a whopping 163 basis points below the deeming rate of 2.25%. “Although the government assumes pensioners are getting at least 2.25% annual return on every dollar over $53,000 in savings or investments to determine their pension income, the numbers tell a different story,” said Mozo Director, Kirsty Lamont.Pensioners who have cash stashed away with the big four banks aren’t winning either, as Mozo’s analysis shows that the average return ranges from 0.21% to 0.35%. “Times have never been tougher for pensioners when it comes to generating an income from their savings, so following the third official rate cut this year it’s time the government did the right thing by older Australians and reduced the deeming rate,” said Lamont. AMP and Bendigo Bank were the providers offering the lowest pensioner rate in the Mozo database, while ANZ’s 9-month (0.15%) and 12-month (0.20%) term deposit rate are the lowest rates for those terms for any bank recorded in Mozo’s database. “There is not a lot of good news around for those in the market for a term deposit, with 86 deposit-takers slashing rates in the past two months and more cuts likely before Christmas as the latest official cash rate continues to wash through the market,” Lamont explained. BankVic currently has the highest 12-month term deposit rate at 1.05%, while the average 12 month rate sits at 0.64%. Mozo calculated that a $25,000 investment with the BankVic 12-month term deposit would see you earn $263 in interest, compared to $160 on the average term deposit rate.
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.