Term Deposits

Summary:

Term deposit returns continue to race to the floor nearly a month since the Reserve Bank of Australia (RBA) cut the nation’s benchmark rate by 25 basis points. 

The third largest bank in Australia is the largest bank to adjust rates in a period that has seen widespread TD rate cuts across the board. One of this week’s movers even reversed its previous week’s hike, dropping the rates on its term deposit offerings. 

As it is with the cash rate cut, expect that term deposit rates, along with home loan rates, are all but headed south. With the RBA hesitant to introduce further cuts and signalling concerns over upside risks, term depositors may soon see rates stabilising. 

However, TD rate movements are subject to a range of factors, including yield curve matching with what banks can get in other funding markets, signalling they aren’t desperate for punters’ funds. Regardless, everyday depositors may be looking at the glory days of 5% p.a. in the rearview mirror, though the spread on top of inflation is probably the healthiest it’s been in a while, with headline inflation at just 2.4%. 

Exhibit 1: Best Term Deposit Rates(12-month) 

So, let’s check the latest market movements over the last two weeks.  

• NAB slashes term deposit rates. NAB wielded the axe on its term deposit products, reducing returns on popular terms, including its headline offer for the 8-month TD. This week’s move marks the first time NAB adjusted term deposit rates since the RBA February cut. However, unlike its widespread cuts pre-RBA meeting, NAB has only touched its 6- and 12-month term deposits, shedding as much as 20 basis points. 

• HSBC cuts rates up to 25 bps. This week’s next-most significant mover, HSBC, made sweeping reductions across its range of term deposit products, cutting rates by up to 25 basis points. Short-term deposits bore the brunt of the cuts, while longer-term deposits saw reductions of between 5 and 15 basis points. 

• Rabobank brings term deposit rates down. If you managed to lock in Rabobank’s boosted rates last week, consider yourself fortunate; this week, the bank reversed course, undoing some of its recent hikes. Rabobank’s one-year fixed term deposit, which received a 5 basis point increase just a week ago, has now been slashed by 15 basis points to 4.30% p.a. Longer-term deposit rates also took a hit, though the 5 basis point reductions this week were milder compared to the hefty 30 basis point increases from the week prior. And all of these along the other terms that slid further down just a week after their rates were reduced. 

• Other drops came from: BankVic, MyState Bank, and Northern Inland CU. 

Term deposit rates by Institution 14th March

Institution	1 m nom	2 m nom	3 m nom	4 m nom	5 m nom	6 m nom	9 m nom	1 Year	2 Year	3 Year	4 Year	5 Year
ANZ	1.25	1.45	3.00	3.15	3.30	3.40	3.60	4.20	3.75	3.10	3.10	3.10
Commonwealth Bank	1.25	1.50	3.00	3.15	3.30	3.40	3.60	3.60	3.75	3.50	3.50	3.50
NAB	1.25	1.45	3.00	3.15	3.25	3.40_	3.60	4.00_	3.80	2.90	2.90	2.90
Westpac	1.25	1.45	3.00	3.15	3.25	3.40	3.75	4.00	3.80	3.40	3.40	3.40
Military Bank			3.50	3.50	3.50	4.60	4.60	4.75	4.65	4.60
AMP Bank	0.10	0.20	4.60	4.45	4.45	4.50	4.40	4.35	4.00	3.00	3.00	3.00
Arab Bank Australia	1.25	1.25	4.15	4.00	4.00	4.70	4.40	4.20	3.75	3.65	3.65	3.55
Bank of Melbourne	1.25	1.45	3.00	3.15	3.25	3.40	3.75	4.00	3.30	3.30	3.30	3.30
Bank Australia			4.60			4.70	4.55	4.45	4.25	4.00
BankSA	1.25	1.45	3.00	3.15	3.25	3.35	3.70	3.95	3.95	3.25	3.25	3.25
Bankwest	2.00	2.00	3.75	3.00	4.75	4.25	4.00	4.50	3.90	3.80	3.80	3.80
Bank of Sydney	1.25	1.50	3.25	4.80	3.50	3.50	3.70	4.00
BankVic			3.60	4.00	3.70	4.70_	3.70	4.50_	4.00	4.00	4.00	4.00
Beyond Bank			4.55			4.40	4.35	4.30	3.70	3.60	3.60	3.60
Bendigo Bank	1.25	1.50	3.50	4.00	4.00	4.30	4.20	4.20	3.25	3.30	3.30	3.30
BOQ	0.75	0.80	2.25	4.60	1.25	4.75	4.70	4.50	4.50	3.30	3.30
BOQ Specialist			4.60	4.65		4.75	4.70	4.50	4.30	3.50	3.50	3.50
Great Southern Bank	1.30	1.60	4.85	2.95	4.80	4.70	4.45	4.45	4.00	3.60	3.60	3.60
Defence Bank			4.00			3.60	3.70	4.20	4.00
Greater Bank	1.00	1.00	4.00	4.00	4.00	4.65	4.00	4.45	4.00	4.00	4.00	4.00
Heritage Bank	1.25	1.50	3.95	4.65	3.60	4.45	4.35	4.25	4.10	3.90	3.90	3.90
Horizon Credit Union	1.25	1.50	3.70	3.70		4.10	4.50	4.30	3.70	3.60
HSBC	1.85	2.00	4.25_	3.50_	3.50_	4.15_	4.15_	4.15_	4.00_	4.00	4.00	4.00
IMB			4.20			4.65		4.40	4.00	4.00	4.00	4.00
ING Direct			4.65	4.50		4.65	4.35	4.50	4.00
in1bank	3.85	3.90	4.45	4.40	4.30	4.25	4.10	3.95	3.85
Judo Bank			4.85			4.85	4.75	4.70	4.55	4.45	4.45	4.45
Macquarie Bank	2.10	2.10	4.55	4.50		4.45	4.35_	4.30_	3.90	3.80	3.80	3.80
ME Bank	0.75	0.80	2.25	4.55	1.25	4.70	2.00	2.00	2.00	2.00	2.00	2.00
MyState Bank	0.50	0.50	4.00	4.20	4.60	4.75_	4.60	4.55_	3.95
Newcastle Permanent	1.00	1.00	4.00	4.00	4.00	4.65	4.00	4.45	4.00	4.00	4.00	4.00
People's Choice Credit Union		1.50	3.95	4.65	3.60	4.45	4.35	4.25_	4.10_	3.90_	3.90_	3.90_
Police Bank			4.10	3.75	3.00	4.00	4.75_	4.60_
P&N Bank		1.75	4.70	4.50	4.00	4.60	4.45	3.65	3.65	3.70	3.70	3.70
RACQ Bank	0.55	1.60	4.85	3.50	3.50	4.65	4.40	4.40	3.90	3.50	3.50	3.50
Rabobank Australia	2.00	2.10	4.55_	4.00_	4.00_	4.40_	4.30_	4.30_	4.10_	4.20_	4.50_	4.65_
Rural Bank Limited	1.25	1.50	3.50	4.00	4.00	4.30	4.20	4.20	3.30	3.30	3.30	3.30
St.George Bank - Except VIC	1.25	1.45	3.00	3.15	3.25	3.40	3.60	4.00	3.30	3.30	3.30	3.30
Suncorp Bank	1.30	1.90	3.95	4.55	3.45	3.65	4.25	4.30	3.75	3.75	3.75	3.75
Teachers Mutual Bank			4.80	4.45	4.50	4.60	4.45	4.40	4.00	4.00
The Capricornian			3.00			3.25		4.00	4.00
Bank First	0.75	1.00	4.45	4.45		4.60	4.45	4.40	4.00	3.80	3.80	3.80