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Interesting Dynamics for Term Deposit Rates

Last Tuesday’s decision to cut the Australian cash rate from the RBA generated some very interesting increases in term deposit rates by the big four banks.

Term deposit rates by the big four banks increased by between 0.45% and 0.85% depending on the bank and the deposit term. This is despite the 0.25% cut to the cash rate by the RBA.

It will be an interesting space to watch because here and globally, we are in unchartered territory in terms of interest rate levels and the outcome is anyone’s guess.

From the big four banks websites:

Commonwealth Bank will increase interest rates by between 0.50-0.55% p.a.on our one, two, and three year Term Deposit (TD) products effective Friday 19 August 2016:
– 1-year TD – 3.00% p.a.
– 2-year TD – 3.10% p.a.
– 3-year TD – 3.20% p.a.

Westpac One year term deposit rate increased by 0.55% to 3.00% per annum, two year term deposit rates increased by 0.45% to 3.10% per annum, and three year term deposit rates increased by 0.55% to 3.20% per annum

ANZ Deposit rate special for popular one-year Advanced Notice Term Deposit to increase by 0.60%pa to 3.00%pa; two-year term deposit to increase 0.75%pa to 3.20%pa with both effective 5 August

Nab from Monday 8 August, NAB will increase its interest rate on 8-month Term Deposits by 0.85% p.a., introducing a Blackboard Special of 2.90% p.a. (interest paid at maturity).

Bank Term Deposit Rates August 2016

Why did this happen?
In short, the banks need to increase their liquidity ratios due to APRA funding requirements. The banks need to make it more attractive to have our population deposit money with them.

What does it mean?
It is finally giving some relief to term deposit / potential term deposit holders.

It could also be a sign (not guaranteed) that the big four banks expect the economy to be near the bottom of the interest rate cycle going forward.

Should you put money into term deposits?
It totally depends on your circumstances. To find out more contact us.

The information provided in this article is intended for general use only. The article is intended to provide educational information only. Please be aware that investing involves the risk of capital loss. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.

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