Term Deposits

Summary:

A week of pause as term deposit rates fell all of February. Term Deposit rates were in freefall since well before the February monetary policy decision, but there was a flurry of banks reacting to the RBA cut with further cuts of their own. There are now merely a handful of products on the Australian market with rates that start with a 5, and given some of these providers are yet to respond to the cash rate cut it might not be long before that count shrinks to zero. 

Unless the economic outlook drastically changes, it looks like what was something of a golden era for term deposit rates has all but passed into history.Sounds like the US theme where money market outflows are going into corporate IG and/or private credit.

Macquarie was the biggest name to cut most recently, while some previously competitive rates from ING and Qudos Bank were also axed.However, the one bit of good news for Aussie savers came from RaboBank, which gave a big boost to its term deposit products with terms of one year and above.

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

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

• Macquarie drops TD rates by 5 bp. For the second week in a row Macquarie Bank cut TD rates, down by another 0.05% in its usual policy of incremental change. That three-month rate of 4.55% p.a. is now the highest available at Macquarie, bringing it below the top available rate at all of the big four banks. 

• ING term deposit rates were slashed last week, but there was slightly better news for savers elsewhere from the Dutch-owned bank. The Savings Maximiser account – which has consistently had one of the highest savings account rates on market in recent times – had the top rate cut by only 0.10% instead of the full 25 bps RBA cut. Customers can still earn 5.40% p.a. on their savings providing they meet bonus conditions, which is perhaps a positive sign that competition in the deposit space could help keep rates from plummeting as monetary policy eases. 

• Qudos Bank cuts rates by up to 40 bps. By the time the rate disappeared on Thursday 2 weeks ago, cuts elsewhere had led to the 4.95% p.a. that was available for six month terms at Qudos Bank becoming one of the strongest on market. The 0.25% cut means it was a brief high, although as rates continue to trend downwards 4.70% p.a. might still look pretty appealing in the coming weeks. 

• RaboBank varies rates by up to 30 bps. Finally, the good news, which was supplied by the predominantly agribusiness lending outfit RaboBank. Three- and six-month terms did get cut, but RaboBank have given longer term TDs a hefty boost. The four and five year rates are particularly eye catching – you’d be extremely hard pressed to find a stronger or even equivalent rate for these term lengths elsewhere. 

• • Other drops came from: Summerland Bank, Heritage Bank, BankWest, People’s Choice, and MyState Bank. 

Term deposit rates by Institution.xlsx

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	3.15	3.3	3.4	3.6	4.2	3.75	3.1	3.1	3.1
Commonwealth Bank	1.25	1.5	3	3.15	3.3	3.4	3.6	3.6	3.75	3.5	3.5	3.5
NAB	1.25	1.45	3	3.15	3.25	3.5	3.6	4.2	3.8	2.9	2.9	2.9
Westpac	1.25	1.45	3	3.15	3.25	3.4	3.75	4	3.8	3.4	3.4	3.4
Military Bank			3.5	3.5	3.5	4.6	4.6	4.75	4.65	4.6
AMP Bank	0.1	0.2	4.60↓	4.45↓	4.45↓	4.50↓	4.40↓	4.35↓	4	3	3	3
Arab Bank Australia	1.25	1.25	4.15	4	4	4.7	4.40↓	4.20↓	3.75	3.65	3.65	3.55
Bank of Melbourne	1.25	1.45	3	3.15	3.25	3.4	3.75	4	3.3	3.3	3.3	3.3
Bank Australia			4.60↓			4.7	4.55↓	4.45↓	4.25	4
BankSA	1.25	1.45	3	3.15	3.25	3.35	3.7	3.95	3.95	3.25	3.25	3.25
Bankwest	2	2	3.75	3	4.75	4.25	4	4.5	3.9	3.8	3.8	3.8
Bank of Sydney	1.25	1.5	3.25	4.80↓	3.5	3.5	3.7	4
BankVic			3.6	4	3.7	4.8	3.7	4.6	4	4	4	4
Beyond Bank			4.55↓			4.40↓	4.35↓	4.30↓	3.7	3.6	3.6	3.6
Bendigo Bank	1.25	1.5	3.5	4	4	4.3	4.2	4.2	3.25	3.3	3.3	3.3
BOQ	0.75	0.8	2.25	4.6	1.25	4.75	4.7	4.5	4.5	3.3	3.3
BOQ Specialist			4.6	4.65		4.75	4.7	4.5	4.3	3.5	3.5	3.5
Great Southern Bank	1.3	1.6	4.85	2.95	4.80↑	4.70↑	4.45↓	4.45↓	4	3.6	3.6	3.6
Defence Bank			4.00↓			3.6	3.7	4.20↓	4
Greater Bank	1	1	4	4	4	4.65	4	4.45	4	4	4	4
Heritage Bank	1.25	1.5	3.95	4.65	3.6	4.45	4.35	4.25	4.1	3.9	3.9	3.9
Horizon Credit Union	1.25	1.5	3.7	3.7		4.1	4.5	4.3	3.7	3.6
HSBC	1.85	2	4.5	3.75	3.75	4.4	4.3	4.2	4.1	4	4	4
IMB			4.2			4.65		4.4	4	4	4	4
ING Direct			4.65	4.5		4.65	4.35	4.5	4
in1bank	3.85	3.9	4.45	4.4	4.3	4.25	4.1	3.95	3.85
Judo Bank			4.85			4.85	4.75	4.7	4.55	4.45	4.45	4.45
Macquarie Bank	2.1	2.1	4.55	4.5		4.45	4.4	4.35	3.9	3.8	3.8	3.8
ME Bank	0.75	0.8	2.25	4.55	1.25	4.7	2	2	2	2	2	2
MyState Bank	0.5	0.5	4	4.2	4.6	4.85	4.6	4.6	3.95
Newcastle Permanent	1	1	4	4	4	4.65	4	4.45	4	4	4	4
People's Choice Credit Union		1.5	3.95	4.65	3.6	4.45	4.35	4.17	4.02	3.83	3.83	3.83
Police Bank			4.1	3.75	3	4	5	4.75
P&N Bank		1.75	4.70↓	4.50↓	4	4.60↓	4.45↓	3.65↓	3.65↓	3.7	3.7	3.7
RACQ Bank	0.55	1.6	4.85↓	3.5	3.5	4.65↓	4.4	4.4	3.9	3.50↓	3.50↓	3.50↓
Rabobank Australia	2	2.1	4.65	4.5	4.5	4.5	4.5	4.45	4.2	4.3	4.6	4.7
Rural Bank Limited	1.25	1.5	3.5	4	4	4.3	4.2	4.2	3.3	3.3	3.3	3.3
St.George Bank - Except VIC	1.25	1.45	3	3.15	3.25	3.4	3.6	4	3.3	3.3	3.3	3.3
Suncorp Bank	1.3	1.9	3.95	4.55	3.45	3.65	4.25	4.3	3.75	3.75	3.75	3.75
Teachers Mutual Bank			4.8	4.45	4.5	4.6	4.45	4.4	4	4
The Capricornian			3			3.25		4	4
Bank First	0.75	1	4.45↓	4.45↓		4.60↓	4.45↓	4.40↓	4	3.8	3.8	3.8