Term deposits continued their descent in March, but things took an interesting turn following the second RBA cut when CommBank, NAB and Westpac decided to raise rates for select terms by as many as 65bp. Since then, many of the smaller banks have announced rate hikes of their own to stay competitive. All told, average term deposit rates fell between 9 and 22 bp across all terms, save for the 12 month average which stayed steady.
It bears mentioning that most of these decisions are being applied to terms of one year or less. While this might provide some interest income security for a little while, it won’t be much help in the long run as it’s very likely we'll be looking at an extended period of low interest rates that could last for quite a few years.
For those looking to lock away their savings for more than a year, providers like Judo Bank and Rabobank are well worth considering. Judo Bank offers rates of at least 2.00% p.a. across all available investment options, with rates as high as 2.15% p.a. on one year and five year terms. Meanwhile, the Rabobank five year term deposit offers rates of 2.25% p.a., making it a worthwhile option for those who are comfortable parting with their savings for a lengthier period of time.
To find out how interest rates are tracking in other banking products for April check out our snapshot for Home Loan Interest Rates or Savings Account Interest Rates.
Page last updated April 9, 2020
Promoted
1.95% p.a.
6 months
$1,000
Great rates and incentives incl. 0.10% added loyalty bonus. Covered by Government Deposit Guarantee for deposits up to $250,000. Winner of the Mozo Experts Choice Awards 2020 for Term Deposits.
$1,000,000.00
yes
yes
Read our Mozo Review to learn more about the Judo Bank Term Deposit
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Promoted
2.10% p.a.
11 months
$1,000
Anyone can apply for a Term Deposit with Defence Bank. Lock away your money with a highly competitive rate, starting a with as little as $1,000 deposit. Part of the Government Deposit Guarantee (Financial Claims Scheme) of $250,000 per person.
$1,000,000.00
yes
yes
Read our Mozo Review to learn more about the Defence Bank Term Deposit
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Promoted
1.80% p.a.
6 months
$5,000
Option to have interest paid at regular intervals. Covered by Government Deposit Guarantee for deposits up to $250,000.
$5,000,000.00
yes
yes
Read our Mozo Review to learn more about the MyState Bank Online Term Deposit
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Promoted
1.75% p.a.
6 months
$5,000
Deposits up to $250,000 protected by the Federal Government deposit guarantee. $0 Account Maintenance Fees
$249,999.00
yes
yes
Read our Mozo Review to learn more about the Bank of Queensland Term Deposit
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Promoted
1.85% p.a.
6 months
$25,000
Interest payable to every one, three or six months (conditions apply). Winner of the Mozo Experts Choice Awards 2020 for best Short Term Deposit and best SMSF Term Deposit.
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Promoted
1.90% p.a.
3 months
$250,000
Highly competitive rates and a $0 Setup and account-keeping fees. This special offer is exclusive to the 3 month term.
$2,000,000.00
no
yes
Read our Mozo Review to learn more about the Citi Term Deposit Special
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Promoted
1.95% p.a.
6 months
$10,000
Lock away your funds with a special fixed Term Deposit rate of 1.95% for a term of 6 months on deposit amounts of $10,000 or more.
-
Read our Mozo Review to learn more about the Transport Mutual Credit Union Term Deposit Special
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Promoted
1.50% p.a.
3 months
$1,000
No fees whatsoever. Choice of a 1, 3, 4, 6, 9 or 12-month term for deposits from $1,000 - $2 million. Loyalty bonus at renewal.
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^See information about the Mozo Experts Choice Term Deposits Awards
Reviews, news, tips and guides to help find the best term deposit for you.
Put simply, a term deposit is a low risk way to make the most out of your savings. If you aren’t a financial risk taker and you’ve got a stash of money lying around that you don’t use, it could be lying in a term deposit and earning high interest.
By putting your money away for a set term and at a set interest rate, a term deposit allows you to maximise your savings with little effort. The only catch is that unlike in a savings account, while your money is in a term deposit, it's off limits!
The interest rate on a term deposit will usually be determined by how long you’re willing to lock your savings away. Below is a basic overview of the different types of term deposits and what interest rates you can expect with each, or, you can visit our term deposit generator for a rundown of all the options available to you.
Short term deposits usually come in periods of one, three or six months. They’re perfect if you’re looking to maximise your savings before you spend them on something like a new car or overseas holiday. Generally, banks will offer lower interest rates for shorter terms.
If you’re in it for the long haul, you can usually choose a period of one, two or five years. Interest rates are usually higher on long term deposits, so if you’ve got a large amount of money that you can afford to put away for a while, this is a great investment.
When your original term is up, you may choose to leave your savings where they are and let your deposit rollover into another term. This is a great way to maximise savings if you’ve found you don’t miss having access to the money, but it's important to check that the interest rate of your rollover term is the most competitive available to you. If not, it may be better to withdraw it and start afresh.
So you know what a term deposit is and how it works. Now let's get down to the details. Here are some frequently asked questions about term deposit interest rates to help you when choosing somewhere to stash your hard earned savings.
Because your term deposit works on a fixed interest rate, it will remain the same, no matter what the market is doing at the time. This means that while your investment is safe from any drops in interest rates, it also won’t benefit from any rises. That’s why it’s so important to shop around for a good interest rate on your term deposit and choose a term that is best going to help you reach your savings goals!
They each have their advantages and disadvantages, so it really depends on what you need. You can check out our comparison of term deposits vs saving accounts, but here are the main differences as far as interest rates go:
Because term deposits are at a fixed interest rate, they aren’t affected by drops or rises in the market. So if interest rates fall, you will keep collecting interest as if it never happened, but if interest rates rise, term deposits won’t see the benefits like a savings account would. And with long terms, you may come to regret locking in at a certain interest rate in two or three years time.
Usually, term deposits will pay interest either annually for longer investments, or, for shorter time frames, at the end of the term. The interest rate won’t change depending on which you choose, so it doesn’t make a difference to how much interest you earn, but it does give you a choice of when you will see the payments roll into your account.
Usually, your interest will be paid via direct credit into your nominated account, similar to a savings account.
One thing to remember is that if your bank’s interest rate for term deposits isn’t great, you might want to look further afield for a better deal. In this case, make sure that the bank you're opening a term deposit with will pay the interest into your chosen account (some banks won’t!).
When your term deposit matures, you’ll have the option to either withdraw your savings so you can start using them again, or renew your term deposit to keep saving. If you’re renewing, make sure you check that the new interest rate you’ve been offered is the most competitive on the market.
One of the reasons a term deposit is such a great motivation not to dip into your savings is that if you make a withdrawal before the term is up, you will be charged a fee. It also means that banks may reduce the interest paid on your deposit, called an interest rate adjustment.
Usually, this is calculated depending on how long you left your savings in the term deposit and will vary from bank to bank. The earlier you make the withdrawal, the lower the interest rate. For example, if you withdraw your savings halfway through a 12 month term, you may only earn 40% of the interest you otherwise would have in those six months.
One of the most important things when applying for a term deposit is shopping around to find the best interest rate. It’s well worth taking the time and effort to research the best option for your preferred term, because the interest you’ll earn is what a term deposit is all about. To make it a little easier for you Mozo has developed these great tools:
And for more information on what interest rates are and how they work, check out our interest rates guides.
