Term deposit rates set to soar



article header

April 21, 2011

The major four banks’ combined yearly wholesale funding reliance is expected to double to $300 billion in the next decade and Australian term deposit customers are likely to help float the banks.

It’s good news for the Australian term deposit market, which is set to see even greater competition bump rates upwards, particularly for those willing to fix funds for longer terms. So if you’re in the market for a term deposit, now may be a good time to compare rates and cash in.

For instance, the average interest rate for a one-year Australian term deposit is 5.86 percent at the moment. Lock in for another two years and the rate jumps up to 6.06 percent.

If you can afford to fix your money for as long as three years at the moment you’ll benefit with an average interest rate of 6.35 percent for $10,000 term deposit investments.

Compare and save hundreds
Not everyone can afford to fix their savings for as long as three years to benefit from these higher rates, of course. But that does not mean you are excluded from high-interest rate term deposits.

Rather, by comparing term deposits online at comparison sites such as RateCity, you’ll likely find competitive rates on shorter-term deposits too.

For example, a six-month term deposit of $10,000 with UBank will grant you an interest rate of 6.31 percent at the moment, which is a higher rate than the average one- and three-year Australian term deposit rates listed on RateCity.

Or fix the same amount for just three months with Suncorp Bank and you’ll currently get an interest rate of 5.95 percent, which is higher than the average for one-year term deposits for accounts listed on RateCity.

Why the banks look to term deposits
Building a base of term deposits helps banks to avoid reliance on the expensive wholesale funding markets. It also means banks are less exposed to external shocks, associated with gaining foreign funding.

And given the recent hits to some bank profits in the wake of natural disasters including Cyclone Yasi and the January floods, it’s in the banks’ best interests at the moment to lure new term deposit customers.

So if you’re in a position to invest in an Australian term deposit, be sure to keep an eye on the market by visiting RateCity over the coming months. You’ll likely find a great rate and help the major banks in their capital raising in the process.

 

 

Related term deposit links

Advertisement

^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

Compare your product with the big 4 banks, or add more products to compare
As seen on