Term deposit rates continue to go south in February

According to Mozo data, term deposit rate cuts have become the norm after 22 providers reduced rates across a range of terms this month.

Big bank NAB slashed two and three year term deposit rates by 50 basis points to 2.60% and 2.70% respectively. Westpac shaved 60bp off two year TD rates and applied smaller cuts to its shorter term deposits.

Another provider taking shorter term deposits to the chopping block was St.George, where its two year rate fell 50 basis points to 2.60%.

This comes as ANZ sliced 60 basis points off its two year TD rates, however lifted three and four year term deposit interest rates by up to 40 basis points in January.

For Mozo’s Product Data Manager Peter Marshall, the pattern of more providers slashing term deposit rates than increasing them hasn’t gone unnoticed.

“It appears the banks are scaling back rates in a bid to improve their interest rate margins,” he said.

“Unless the banks find a cheaper source of funding for their home loans, we’ll continue to see shorter term deposit rates under pressure.”

Despite rate reductions dominating the TD market this month, customers still have access to competitive rates over the 3% mark for two and three year terms.

“The good news is that even the big second tier banks like St.George and the Bank of Melbourne are offering decent rates, giving savers more scope to choose their preferred provider,” Marshall explained.

Best two year TD rates (3.10% interest rate):

Best three year TD rates (3.20% interest rate):

Marshall warned that the current top interest rates on shorter term TDs may be the highest Aussie savers will see for a while.

“In fact it appears that term deposit rates are only going to get worse,” he added.