Time to save? Term deposit rates are quietly on the rise

In the last couple of months interest rates for term deposits have been increasing, in some cases by about 20 basis points. In January alone there were 47 increases recorded on Mozo’s database. 

If you aren’t too familiar with the world of finance, a term deposit is a bit like a savings account but once money goes in, it stays for a set period before you can take it out. Typically a term deposit is a safe place to stash your money while it earns interest during this time and as such, is seen as a low-risk investment.

As mentioned, the interest rates of term deposits have been steadily going up, especially for longer terms.

Mozo’s banking expert Peter Marshall believes this has to do with the Federal Reserve’s plan to lift the official cash rate this year. Many banks are already increasing their rates prior to the Reserve’s expected announcement. 

“Banks are also thinking they will need to start getting more deposit customers, so there’s some increasing competition there. I think that term deposit rates will be under the same pressure that fixed home loan rates are, and continue to creep steadily higher,” he says.

So let’s take a closer look at changing rates.

What are some notable term deposit increases?

In the last couple of months, rates for longer term deposits have seen big growths, some as big as 20 basis points. 

For example, Judo Bank also made a number of interest rate increases putting several of its term deposits in the top spots in the Mozo database.

Some of its current competitive rates are:

• 1.15% p.a. for a six month term
  
• 1.15% p.a. for a 1 year term
  
• 1.45% p.a. for a 2 year term
  
• 1.55% p.a. for a 3 year term
  
• 1.85% p.a. for a 4 year term
  
• 1.95% p.a. for a 5 year term

However, Judo Bank isn’t the only one increasing their rates. According to Mozo’s database some of the banks who have recently raised their rates include:

• AMP Bank
  
• MyLife MyFinance
  
• ME BankIt should come as no surprise if more banks follow suit and raise their term deposit rates soon as well.