Term deposits could still offer a safe ‘set and forget’ option despite rates trending down

Savers looking for a ray of sunshine to start the new year could be forgiven for shedding a tear, with the first few weeks of 2018 seeing the ongoing downward trend of many term deposit rates continue.

New Mozo data has revealed that term deposit providers have already made 83 rate cuts in the first three weeks of January, with just 17 rates trending higher.

And according to Mozo Product Data Manager Peter Marshall, savers looking for a better return may be in for an uncertain wait - at least in the short term.

“There’s a lot of talk about increasing rates, and I think that will come eventually, but it would require some greater improvement in the wider economy,” Marshall said.

“The banks seem to be more interested in cutting key loan rates at the moment which is great for borrowers, but it means that savers are getting the raw end of the deal.”

RELATED: Shop before you lock: Term deposit choice could cost you $500

Despite the recent downward trend in term deposit rates, a number of offers in the Mozo database remain above the 3% mark - potentially offering savers a competitive set and forget option to traditional savings accounts.  

For example, according to the Mozo Term Deposits Calculator, a saver looking to put away $25,000 in Greater Bank’s 5 year term deposit with a 3.20% interest rate (currently the highest rate in the Mozo database) would finish with a closing balance of $29,000 come maturity.

In comparison, the Mozo Savings Calculator shows that a saver putting $25,000 into the Queenslanders Credit Union Go Saver Online Account with a 2.30% interest rate (currently the highest savings account rate in the Mozo database with no conditions attached) would end up with a final balance of $28,044 over the same period - a difference of almost $1,000.

RELATED: Savings accounts vs term deposits guide 

“With a term deposit, savers have a sense of stability and security in knowing that their money is relatively safe - both in terms of a government guarantee and a fixed interest rate,” said Marshall.

“The best ongoing savings account rates tend to require minimum criteria to be met - like a minimum monthly deposit - so when you compare term deposits to other ongoing savings accounts rates with no requirements the difference can become quite stark.”

Interested in comparing a range of term deposit offers for yourself? The Mozo term deposit comparison hub makes it easy, with offers from over 60 different banks to choose from.