Term Deposit Rates Surge Past 5%, Smaller Banks Lead the Charge
Term deposit rates across Australia are continuing their upward trajectory, consistently surpassing the 5% per annum (p.a.) benchmark. This surge is largely driven by the Reserve Bank of Australia’s (RBA) recent decision to increase the official cash rate, with several smaller financial institutions now offering the highest rates on the market.
The landscape of term deposits has transformed rapidly. What was once a cause for celebration when rates nudged past the 5% mark has now become a steady stream of competitive offerings. This shift is a direct consequence of the RBA’s second consecutive hike to the cash rate, implemented this week.
While the market had largely anticipated this move, a degree of uncertainty had tempered expectations in the lead-up to the announcement. Global events, particularly the ongoing conflict in the Middle East and its impact on fuel prices, contributed to this cautious outlook. The RBA’s own monetary policy board reflected this divided sentiment, with a narrow 5-4 vote in favour of the cash rate increase.
RBA Governor Michele Bullock clarified that those who voted against the hike were primarily concerned with the timing rather than the direction of the increase. The simultaneous rise in fuel prices, exacerbated by the global conflict, presents a significant challenge for many households. However, with inflation projected to reach 5% as a result of these geopolitical pressures, the RBA board appears to have opted for proactive intervention, choosing to act sooner rather than waiting for its May meeting.
For those holding cash savings, this renewed focus on higher interest rates offers a welcome return after a period of lower yields. The term deposit market, in particular, is experiencing a significant upswing.
Big Banks Boost Term Deposit Offerings
Several of the larger banking institutions have also been active in adjusting their term deposit rates. Macquarie Bank, along with three other major players, has increased its term deposit offerings this week, with some now featuring rates above 5%.
National Australia Bank (NAB) made notable adjustments to its one- to two-year term deposit rates. As of Friday, NAB is offering 5.00% p.a. on a two-year deposit for amounts between $5,000 and under $2 million, with interest paid annually.
While Westpac also revised a number of its term deposit rates upwards by up to 0.40% on Friday, its new offerings did not surpass the 4% benchmark, thus receiving less attention in the current high-rate environment. Similarly, other banks within the Westpac group, including St George, Bank of Melbourne, and BankSA, saw some term deposit rate increases of up to 0.70%, but these also remained below the 4% mark.
Macquarie Joins the ‘5%’ Club
Macquarie Bank, a consistent challenger to the traditional ‘big four’ banks, has been a key player in this upcycle, being one of the first major banks to introduce a term deposit rate exceeding 5%. Macquarie is currently offering 5.00% p.a. for a one-year term deposit on amounts ranging from $5,000 to $1 million, with interest paid at the end of the term. The bank has been steadily increasing its rates, widening the gap with the offerings from the major four.
Australia’s two largest banks, Commonwealth Bank and Westpac, have also updated their special offer rates this week, though their rates are still considerably lower.
It is worth noting that Commonwealth Bank has also increased its two-year term deposit rates, offering 4.85% p.a. for terms between 24 and 33 months on deposits between $50,000 and $5 million, with annual interest payments.
The Rise of the 5.20% Club
The benchmark for top-tier term deposit rates has now shifted beyond the 5% mark, with the “5.20% Club” becoming the new target. This exclusive group is primarily comprised of smaller banks vying for a larger share of the deposit market by offering highly attractive rates.
The Emerging 5.15% Club
A new tier of competitive rates is also emerging, with the “5.15% Gang” gaining traction. Community First Bank, a customer-owned institution, has joined this group with its Term Deposit special offer of 5.15% p.a. This rate is available for amounts between $10,000 and $1 million invested for 12 months, with interest paid upon maturity. This offer is valid until May 31st or until the allocation is fully subscribed. AMP Bank is also providing a 5.15% p.a. rate for a 12-month term, catering to larger deposit amounts between $25,000 and $10 million, with interest paid at the end of the term.
New Term Deposit Deals at 5.10%
Amidst the ongoing flux in the term deposit market, several other noteworthy new offers have emerged this week.
Competitive 5.05% p.a. 12-Month Rates
Bank First has launched a new one-year term deposit rate of 5.05% p.a. for deposits exceeding $500, with interest paid at the end of the term. This customer-owned bank also offers a 1-year Regular Income product at 4.95% p.a. for deposits over $5,000, with fortnightly interest payments. Meanwhile, Heartland Bank has also increased its 12-month rate to 5.05% p.a. for amounts between $10,000 and $1 million, with interest paid annually.
Other Notable Term Deposit Rate Movements
Beyond these headline figures, a dozen or more other financial institutions have also increased their term deposit rates this week. Some of the more notable rates include:
- The Mutual Bank: Offering 5.00% p.a. for a 12-month deposit between $1,000 and under $500,000, with interest paid at maturity.
- Teachers Mutual Bank and UniBank: Announcing a 4.80% p.a. 12-month rate for Edvest members aged over 50. This includes a 0.05% bonus on the standard rate of 4.75% p.a. available to other members.
- Summerland Bank: Presenting a new special offer rate of 4.80% p.a. for a 12-month deposit on amounts between $100,000 and under $1 million.
- BCU Bank: Also featuring a new top rate of 4.80% p.a. for a 12-month deposit on amounts between $1,000 and under $1 million, with interest paid at the end of the term.
