Comfort spending is all too tempting during the cold winter months, especially when you’re stuck at home during a lockdown. You may not be allowed to go outside, but you can still access the internet right? Before you know it harmless browsing turns into five things in your cart and a big dent in your savings stash. If only there were somewhere to keep your rainy day fund out of reach.
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As the new 2021/22 financial year begins, the outlook for term deposits is a little rosier.
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The last few years haven’t been great for savers. After six cash rate cuts in 2019 and 2020, interest rates across the board have fallen, including for home loans, savings accounts and of course term deposits.
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Another month gone, another round of term deposit interest rate changes to report on. In April, Mozo's research team counted at least one cut from 18 different term deposit providers. The average interest rate for a $25,000, 1-year term deposit didn't change much, dropping slightly from 0.53% p.a. to 0.52% p.a.*
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Despite the Reserve Bank having made no further cuts to the cash rate this year, interest rates for term deposits are still very much on a downward spiral.
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This time last year the average interest rate for a 12 month term deposit was 1.43%. Now it's less than half that at 0.56%.*
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In light of the avalanche of rate cuts over the past year, term deposits have become an increasingly attractive option to savers wanting more certainty over their interest earnings.If you’re one such Australian and you’re eager to secure a competitive rate over the next few months or years, Mozo has some exciting news. Today we revealed the best term deposits for this year in the 2021 Mozo Experts Choice Awards. As part of these awards, Mozo’s expert judges analysed 73 term deposits across a range of investment terms from one month up to five years, in order to determine the best of the bunch. Neobank Judo Bank was a standout winner, taking home a Mozo Experts Choice Award for best Term Deposit for the second year in a row. It carries this dual honor alongside customer-owned banks like UniBank, Firefighters Mutual Bank and Teachers Mutual bank.
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In December last year, Mozo counted a huge 785 term deposit interest rate cuts. This January there have been 382 from 36 providers. So while term deposit interest rates are still heading downwards, it looks like banks might have started to ease up on the cuts.
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Pensioners are continuing to draw the short straw when it comes to deposits, according to new Mozo analysis. Mozo found that on a balance of $53,000, the average pensioner account rate now sits at a mere 0.62%, which is a whopping 163 basis points below the deeming rate of 2.25%. “Although the government assumes pensioners are getting at least 2.25% annual return on every dollar over $53,000 in savings or investments to determine their pension income, the numbers tell a different story,” said Mozo Director, Kirsty Lamont.Pensioners who have cash stashed away with the big four banks aren’t winning either, as Mozo’s analysis shows that the average return ranges from 0.21% to 0.35%. “Times have never been tougher for pensioners when it comes to generating an income from their savings, so following the third official rate cut this year it’s time the government did the right thing by older Australians and reduced the deeming rate,” said Lamont. AMP and Bendigo Bank were the providers offering the lowest pensioner rate in the Mozo database, while ANZ’s 9-month (0.15%) and 12-month (0.20%) term deposit rate are the lowest rates for those terms for any bank recorded in Mozo’s database. “There is not a lot of good news around for those in the market for a term deposit, with 86 deposit-takers slashing rates in the past two months and more cuts likely before Christmas as the latest official cash rate continues to wash through the market,” Lamont explained. BankVic currently has the highest 12-month term deposit rate at 1.05%, while the average 12 month rate sits at 0.64%. Mozo calculated that a $25,000 investment with the BankVic 12-month term deposit would see you earn $263 in interest, compared to $160 on the average term deposit rate.
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In November another Reserve Bank cash rate cut occured, and since then Mozo has counted an astounding 785 reductions to term deposits. The average cut was 13.7 basis points and the average rate for a one-year term fell 11 basis points to 0.65% p.a.*
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