Why term deposit rates have taken a tumble

Term deposit interest rates are being cut at a noteworthy level this month and the question for would-be savers surely is, why?

Among the major banks cutting rates are CommBank, NAB, ANZ, as well as leading neobank, Judo.

Mozo’s Banking Expert, Peter Marshall says, "As confidence in the direction and timing of the Reserve Bank's next cash rate movement becomes more certain, banks are preparing for that change by adjusting their rates for both deposits and loans. 

“Banks are starting to bring down fixed deposit and loan rates now as the RBA is expected to start bringing down the cash rate either later this year or in the first half of next year."

Spending versus saving

The RBA also notes that household wealth has grown over the past year (5%) and is 22% higher than prior to the pandemic. The increase in wealth since the pandemic has been driven by strong housing price growth, additional savings by households during the pandemic and equity price increases. 

More so-called wealth has led to more spending, and increased spending - along with reduced saving in 2024 - is impacting inflation. 

In May, CBA reported that spending increased by 2.5% nationally, with ‘essentials’ increasing by 3.6%. However, since then consumers have been cutting back and spending levels have generally dropped, CBA says. (The figures get complicated because different age groups and cohorts are behaving differently). 

RBA rate cuts ahead?

All up, CBA now expects softer economic data ahead, a further deceleration of inflation, and easing of monetary policy by overseas central banks which will likely lead to the RBA cutting interest rates in the months ahead.

If this is the case, long-term savers might prefer to lock in a good term deposit rate sooner rather than later. 

CBA, NAB, ANZ and Judo among term deposit rate cutters

Commonwealth Bank, NAB, and ANZ all reduced term deposit rates this month.

CommBank dropped its term deposits by as much as 60 basis points, while NAB and ANZ have made even steeper cuts of up to 80 basis points. 

Other providers such as AMP and Judo Bank also didn’t shy away from some downwards adjustments too. For now, it looks as if providers are tightening up on most terms.  

Best term deposit rates available

Despite these recent cuts, some more attractive rates can still be found in the Mozo database, particularly in the 6 to 12 month term deposit range. 

Plus, several providers in our database continue to offer rates around the 5% range.

For example, on 6 month terms:

• G&C Mutual is currently the leading rate at 5.20% p.a. 
• Heartland Bank offers 5.15% p.a. on its 6-month term
• Australian Unity, Bank of Sydney, Gateway Bank, ING, and Judo Bank's 6-month terms are all at 5.10% p.a.

While for 12 month terms:

• G&C, Heartland, and Illawara credit union are tied for the highest rate at 5.10% p.a.
• ING offers a 5.05% p.a. rate
• A little over a dozen other providers offer 5.00% p.a.

All of these stack up pretty well given that the average (based on balances of $25,000) in the Mozo database for 6 months is 4.41% and 4.63% for 12 month term deposits as of the 21st August 2024.

Term deposit trends in 2024

Banks have increased rates on new term deposits by around 435 basis points since February 2022, slightly more than the cash rate, the Reserve Bank reported in April. 

However, recent rate cuts show that many providers likely believe that rate cuts are possible in the not so distant future. 

To compare term deposit rates, head over to our term deposit landing page. Alternatively, you can check out some providers in the tables below…