Westpac drops term deposit rates by as much as 60bp

Stashing cash in a term deposit with a high interest rate is known for being a safe way to grow funds, however savers may be disappointed to hear that over the last two months a number of banks have reduced the value of their deposit accounts.

Just this week big bank Westpac slashed nine of its term deposit (TD) rates, with the largest cuts applied to its 10 month and 3 year rates by 70 basis points and 60bp respectively, while less severe changes were made to its 4, 5, 7 and 9 month terms by only 10bp or 15bp.

Summary of Westpac’s TD cuts:

*Calculation based on a $10,000 deposit that has reached maturity

According to the latest Mozo data, 26 TD providers have reduced rates since the start of April, with three quarters of the cuts being applied to term deposits under one year.

Westpac isn’t the only major bank to slash rates, as ANZ dropped its six month rates down 10bp to 2.10% and five year term deposit rates by 15bp to 2.40% last month.

Commonwealth Bank term deposits were recently hit with cuts too, with CBA taking its three year TD rates down 80 basis points in April.

Why are term deposit rates going down?

Last year we reported on major banks pumping up rates well over the 3% mark, around the same time they failed to pass on the full RBA cash rate cut to mortgage holders.

Some industry experts suggested at the time that the banks were raising term deposit rates to appease disgruntled customers. But those lucrative rates were short lived, as a few months later they fell back down again, and the Mozo database has been inundated with cuts since.

Here’s the good news - the government’s upcoming “big bank tax” set to kick in on July 1, may just be the catalyst that raises TD rates once again.

“In theory, the levy should encourage major banks affected to improve their term deposit rates as they’ll be relying more on local deposits for a more balanced funding mix,” explained Mozo’s Product Data Manager, Peter Marshall.

Until that happens, Aussie savers looking for a competitive term deposit rate can nab a rate over 3% if they shop around...

Best TD rates:

If you’re looking for a top TD, you can also head to our term deposit hub which allows you to compare not only rates, but key features too.