Term deposit rates continue to plunge, but there’s still time to get hold of a good one

Niko Iliakis

Thursday 07 March 2019

If you’ve been following term deposits rates lately, you might think their gradual descent spells doom and gloom. After all, February marked the fifth month in a row that we saw more cuts to term deposit rates than we did increases.

And as both large and small players make cuts across the board, many of the highest rates that were around a month ago are now no longer available.

Not even the usual star performers have held up. Arab Bank Australia has reduced its market leading 9 and 12 month offerings from 3.00% p.a. to 2.80% p.a., losing its top spot in the process.

So if you were planning on putting your rainy day fund away for a year or less, you might have already missed the boat on the best offers. Save for a handful of cases, like the ones listed below, you’d be hard-pressed to find many that offer any particularly impressive returns.

Best short term deposit rates

Length of TermProviderRate
3 monthUBank2.70% p.a.
5 monthCredit Union SA2.85% p.a.
6 monthArab Bank AustraliaBank of SydneyRaboDirect2.85% p.a.
7 monthBank of Sydney2.85% p.a.
9 monthBank of Sydney2.82% p.a.
1 yearBank of SydneyGateway Bank2.85% p.a.


Why the downward trend in term deposit rates?

Mozo Data Manager, Peter Marshall, said the dip in rates we’ve seen as of late has been the result of a “perfect storm.”

“I think what we’re seeing is a lack of appetite, a lack of competition, and also a building expectation that the cash rate is more likely to be cut in the short and medium term than it is to increase,” he said.

An RBA cash rate cut has been on the horizon for some time now, and banks have been factoring it into their term deposit rates in preparation. For savers, that means there might only be a little while before even the best rates vanish.

“I think that the top one year rates that are around right now won’t be around much longer,” Marshall said. “I expect that in the next six weeks or so they’ll be gone. There’s a bit of time left to lock in a decent rate but the window is closing.”

Two year rates are the new black

The flipside to all this is that rates for longer term deposits have remained steady, if not increased. A glance across our database showed that the top rate for two year offerings (from none other than G&C Mutual Bank) jumped up from an already impressive 2.80% to a staggering 3.10% p.a.

Two years has become the new ‘sweet spot’ for term deposits, offering a balance between a manageable term length and a decent interest rate.

As for when short term rates will return to their previous levels, Marshall remains optimistic.

“There is still an expectation that in the longer term rates will go up again, even if we go through a bit of a dip for a year or so,” he forecasted.

“Locking in for a year or two might prove just long enough to ride out the current low rate market and free yourself up to take advantage of better rates once they start trending up again.”

So if you’re looking for a place to stash your cash and don’t mind waiting a while before you see those returns, head over to our term deposit comparison page.

Compare today's top term deposits

Back to top