When will term deposit rates go up?

Over the course of the Covid-19 pandemic, term deposit rates hit record lows. Since then (as at February 2024), they've increased quite dramatically as the RBA tries to steady the economy and put pressure on high inflation. Term deposit rates have largely increased due to a few factors, including:

• The Reserve Bank of Australia (RBA) lifting the cash rate (from a historic low of just 0.10%)
• Banks and lenders starting to lift their home loan rates

See current term deposit rates

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Name	3 Mths p.a.	4 Mths p.a.	5 Mths p.a.	6 Mths p.a.	7 Mths p.a.	11 Mths p.a.	12 Mths p.a.	24 Mths p.a.
Promoted Promoted Newcastle Permanent Term Deposit $1,000 min. deposit	3 Mths p.a. 4.00%	4 Mths p.a. 4.00%	5 Mths p.a. 4.00%	6 Mths p.a. 4.75%	7 Mths p.a. 3.80%	11 Mths p.a. -	12 Mths p.a. 4.55%	24 Mths p.a. 4.00%	Go to siteMore Info Compare	Lock in a rate as high as 4.75% for 6 months with a minimum $1,000 deposit.
Promoted Promoted Judo Bank Term Deposit $1,000 min. deposit	3 Mths p.a. 4.95%	4 Mths p.a. -	5 Mths p.a. -	6 Mths p.a. 5.05%	7 Mths p.a. -	11 Mths p.a. -	12 Mths p.a. 5.00%	24 Mths p.a. 4.70%	Go to siteMore Info Compare	You can get competitive interest rates on all term lengths. This term deposit has a low minimum deposit amount and is a 2024 Finder Award winner.
Judo Bank Term Deposit Finder Award$1,000 min. deposit	3 Mths p.a. 4.95%	4 Mths p.a. -	5 Mths p.a. -	6 Mths p.a. 5.05%	7 Mths p.a. -	11 Mths p.a. -	12 Mths p.a. 5.00%	24 Mths p.a. 4.70%	Go to siteMore Info Compare
Newcastle Permanent Term Deposit $1,000 min. deposit	3 Mths p.a. 4.00%	4 Mths p.a. 4.00%	5 Mths p.a. 4.00%	6 Mths p.a. 4.75%	7 Mths p.a. 3.80%	11 Mths p.a. -	12 Mths p.a. 4.55%	24 Mths p.a. 4.00%	Go to siteMore Info Compare
Bankwest Term Deposit $1,000 min. deposit$10,000,000 max. deposit	3 Mths p.a. 3.75%	4 Mths p.a. 3.00%	5 Mths p.a. 3.00%	6 Mths p.a. 4.25%	7 Mths p.a. 4.00%	11 Mths p.a. -	12 Mths p.a. 4.70%	24 Mths p.a. 3.90%	Go to siteMore Info Compare

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Why do term deposit rates fall with the RBA cash rate?

The cash rate is Australia’s benchmark interest rate, so any changes the RBA makes to this figure are commonly passed on to the products offered by Australian banks. So while the current low rates aren't great news for home loan borrowers, they mean that savers are get a better return on their term deposit investments.

However, it’s worth pointing out that a cut to the cash rate doesn’t necessarily mean lower term deposit rates. Sometimes, banks choose to keep their term deposits rates as they are or, in rare situations, increase their rates. There are several possible reasons behind this move, including:

• Putting pressure on smaller financial institutions in the term deposit market
• Generating more funding to cover an increased demand for fixed-rate home loans
• Providing protection against overseas financial turmoil by reducing reliance on overseas funding sources

What other factors affect term deposit rates?

There are several factors that have an influence on how banks set their term deposit rates in addition to the cash rate, including:

• What the competition is doing. Australia’s banking industry is highly competitive and the major banks are always looking for ways to steal customers from their rivals. A quick comparison of term deposit rates across the major banks reveals just how competitive the deposit market is, and a bank will consider how its products compare to those offered by other financial institutions when setting rates.
• The bank’s financial position. If your bank is looking to improve its financial position, it may want to increase the amount of funding it receives from term deposits. In an effort to increase its share of the Australian term deposit market, it might increase the rate it offers on specific term deposits to entice new customers away from its competitors.
• The global economic climate. Banks also make interest rate decisions based on future economic forecasts. For example, a bank may choose to protect itself from overseas financial turmoil by reducing its reliance on funding from overseas sources and at the same time increasing its funding from Australian deposits. In order to do this, it may raise its term deposit rates relative to the competition.

How to get a better term deposit rate right now

Regardless of the RBA’s official cash rate and average term deposit rates, there are still several things you can do to increase the interest-earning capacity of a term deposit:

• Shop around. Although average term deposit rates may be at record lows, there’s still a substantial difference between the lowest and highest rates on offer at any given time. With this in mind, it’s essential to compare a range of term deposit options and shop around for the highest interest rate you can find.
• Look beyond the major banks. Australians have a tendency to remain loyal to their regular bank, which is more often than not a Big Four bank, even if it doesn’t offer the best interest rate. However, some of the best term deposit deals can be found at Australia’s smaller banks, credit unions and building societies, so don’t be afraid to look beyond the Big Four for a good deal.
• Consider investing for longer. You will typically be able to find slightly higher rates on deposits with longer terms than on those with shorter terms. If it’s convenient for you to lock away money in a term deposit for 12 months or more, you will be able to enjoy higher interest-earning power.
• Invest a larger amount. The larger the amount of money you have to invest, the higher the interest rate you will receive. Many banks offer tiered interest rates for term deposits – for example, they may offer a base interest rate for deposits of up to $10,000, a slightly higher rate for deposit amounts of $10,000 to $25,000, and a higher rate again on amounts of $25,000 or more.
• Negotiate. If you’ve got $100,000 or more to invest, many financial institutions may be willing to let you negotiate a better rate. The more money you have to invest, the greater your bargaining power, so don’t be afraid to ask for a better deal.
• Use a high interest savings account instead. Although current term deposit rates are at record lows, things won’t stay that way forever and rates will rise again at some stage. So rather than locking all your money away in a term deposit for an extended period, it may be worth investing a portion of your funds in a high interest savings account so that you can easily access it if term deposit rates go up.

Frequently asked questions

• Is it worth putting money in a term deposit?

  Term deposits are a safe way to earn a fixed interest rate on your savings. They are ideal if you prefer low risk and want guaranteed returns, but they usually offer lower returns than riskier investments like shares.

• What is the best term deposit in Australia?

  The best term deposit in Australia depends on the interest rates, fees, and conditions offered by each bank. It's recommended to compare current rates across banks to find the best option for your needs. As of late 2024, a term deposit that offers a rate of 4.5% or more is considered a good return.

• What are the big 4 bank term deposits in Australia?

  The Big 4 banks (ANZ, Commonwealth Bank, NAB, and Westpac) offer term deposits with varying interest rates and terms that change constantly. It's best to visit their websites for the current rate. Typically, they provide competitive, secure term deposit options, but their rates may be lower than smaller banks.

• Is it better to put money into super or term deposit in Australia?

  Superannuation can provide higher long-term returns due to compound interest and market exposure, while term deposits offer guaranteed returns. Super is often a better option for long-term return, while term deposits suit short-term goals. Keep in mind, any money deposited into super can not be accessed until retirement, so a term deposit might be a better option if you'll need access to your money.

• What is a disadvantage of term deposits?

  A key disadvantage of term deposits is that your money is locked away for the term's duration, limiting access to funds without penalty. Additionally, returns are usually lower compared to other investment options like shares.

Written by

Tim Falk

Writer

Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio

Co-written by

Alison Banney

Editor

Alison Banney is the money editorial manager at Finder. She covers all areas of personal finance, and her areas of expertise are superannuation, banking and saving. She has written about finance for 10 years, having previously worked at Westpac and written for several other major banks and super funds. See full bio

Alison's expertise

Alison has written 625 Finder guides across topics including:

• Superannuation
• Savings accounts, bank accounts and term deposits
• Budgeting and money-saving hacks
• Managing the cost of living