Savers for the win: How to maximise savings in a low rate world
- 11 lenders lift term deposit rates by as much as 0.85 percentage points
- How much extra interest you can earn over 12 and 36 months
- How to boost your savings with a term deposit account
5 August, 2016, Sydney, Australia – Despite the Reserve Bank's latest cash rate cut to a new historic low of 1.5% on Tuesday (02/08/16), the tide seems to finally be turning for savers across the country with news that 11 lenders are lifting term deposit rates, by as much as 0.85 percentage points, analysis by Australia’s most visited comparison site1, finder.com.au reveals.
The big four banks are leading the charge, announcing increases to their term deposit rates which will see them exceed the market average 12 month and 36 month term deposit rates of 2.48% and 2.64%, respectively.
ANZ, Commonwealth Bank and Westpac have come to the party, each announcing new increased annual rates of 3.00% for 12 month term deposits, up by 0.52 percentage points. Additionally, Commonwealth Bank and Westpac have announced an updated 36 month term deposit rate of 3.20%, an uplift of 0.56 percentage points. ANZ has also announced a 24 month term deposit rate of 3.20%, which is an increase of 0.75 percentage points.
NAB, meanwhile, has announced a new 8 month term deposit rate of 2.90%, an increase of 0.85 percentage points.
Other lenders that have announced increases to term deposit rates include Newcastle Permanent Building Society which will pass on 0.50 percentage points for its 12 month term deposit and Bank of Melbourne which will offer a 0.55 percentage point increase for its 12 month term deposit account.
Changes to term deposit accounts
|Financial Institution||Product||Previous rate||New rate||Percentage point change||Date effective|
|Commbank||12 Month Term Deposit $50,000-$1,999,999||2.45%||3.00%||0.55%||19 August|
|Commbank||24 Month Term Deposit||2.60%||3.10%||0.50%||19 August|
|Commbank||36 Month Term Deposit||2.70%||3.20%||0.50%||19 August|
|NAB||8 Month Term Deposit||2.05%||2.90%||0.85%||8 August|
|ANZ||12 Month Advance Notice Term Deposit||2.40%||3.00%||0.60%||5 August|
|ANZ||24 Month Advance Notice Term Deposit||2.45%||3.20%||0.75%||5 August|
|Westpac||12 Month Term Deposit||2.45%||3.00%||0.55%||8 August|
|St.George||12 Month Term Deposit||2.45%||3.00%||0.55%||8 August|
|BankSA||12 Month Term Deposit||2.45%||3.00%||0.55%||8 August|
|Bank of Melbourne||12 Month Term Deposit||2.45%||3.00%||0.55%||8 August|
|Bankwest||36 Month Term Deposit||2.90%||3.00%||0.10%||9 August|
|Bankwest||12 month Term Deposit||2.85%||3.00%||0.15%||9 August|
|Bank of Queensland||12 Month Term Deposit||2.75%||3.05%||0.30%||9 August|
|Bank of Queensland||24 Month Term Deposit||2.60%||3.15%||0.55%||9 August|
|Bank of Queensland||36 Month Term Deposit||2.65%||3.25%||0.60%||8 August|
|Bank of Sydney||3 month Term Deposit ($1000-$9,999)||1.85%||1.60%||-0.25%||4 August|
|Bank of Sydney||3 Month Term Deposit ($50,000-$99,999)||2.35%||2.10%||-0.25%||4 August|
|Bank of Sydney||12 Month Term Deposit ($1000-$9,999)||2.05%||1.80%||-0.25%||4 August|
|Bank of Sydney||12 Month Term Deposit ($50,000-$99,999)||2.65%||2.40%||-0.25%||4 August|
|Newcastle Permanent Building Society||12 Month Term Deposit||2.00%||2.50%||0.50%||8 August|
|IMB||48 Month (4 Year) Term Deposit ($5,000 -$24,999.99)||2.90%||2.80%||-0.10%||5 August|
|IMB||60 Month (5 Year) Term Deposit ($5,000 -$24,999.99)||3.10%||3.00%||-0.10%||5 August|
|Westpac||12 Month Term Deposit||2.45%||3.00%||0.55%||8 August|
|Westpac||24 Month Term Deposit||2.65%||3.10%||0.45%||8 August|
|Westpac||36 Month Term Deposit||2.65%||3.20%||0.55%||8 August|
Bessie Hassan, Money Expert at finder.com.au, says banks may be lifting term deposit rates to preserve their competitive ability to raise deposits and to ensure they have capacity to cope with any future political or economic shocks.
“Financial institutions need a sufficient ratio of money borrowed and cash deposits to protect themselves if their loan books go sour. For example, any disruption in the property market or overseas economies could hurt their bottom line,” she says.
Ms Hassan says banks are curbing the trend by lifting term deposit rates, so there’s opportunity for Australians to pocket greater savings in the form of interest earned on funds.
“This is a fantastic move by the banks and the benefit will be felt by Australian households, and in particular self-funded retirees and those who rely heavily on savings for income.
“If you’re prepared to lock in your funds at a competitive rate, you can grow your savings balance significantly.
“Given the average increase of 0.52 percentage points issued by the Big Four banks for a 12-month term deposit of 3.00% on $100,000, savers could earn an additional $520 over the course of a year,” she says.
For those who lock in a 36 month term deposit at the new average rate of 3.20%, this could result in an additional $1,779, while those with a smaller deposit of $25,000 would still reap an extra $445 over 36 months if they lock in the new rate.
Ms Hassan says term deposit accounts can be useful for savers with a large amount of funds saved, as they allow you to lock away your funds for a guaranteed return.
“As your money is locked away, you typically get a higher interest rate on a term deposit account compared to a regular savings account. If you have a large amount of money tucked away in a term deposit account, you can benefit from accrued interest over time.”
Account holders are warned to keep an eye out for rate changes, and to take note of the rate change size and the date in which it becomes effective.
“With more rate changes yet to be announced, do some research to see which banks are raising, or dropping, term deposit rates so you can make an informed decision,” Ms Hassan says.
As at the end of July, the average interest rate for all variable savings accounts was 2.66% however this rate may lower if banks pass on rate cuts for savings accounts, so there’s incentive for Australians to consider a term deposit account with a higher rate.
Term deposits: how much extra you can earn
|Deposit amount||12 months at 2.48% interest||12 months at 3.00% interest||Difference||36 months at 2.64% interest||36 months at 3.20% interest||Difference|
source: finder.com.au, interest compounded annually.
Term deposits can be a safe investment for savers who are looking to maximise their interest, but keep in mind that if you need to access your funds before the term expires, you may need to pay a fee.
Compare term deposit accounts online to secure a favourable rate.
1 Average 1.7M visitors monthly, Experian Hitwise since 2015
For further information
The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
More than 3 million Australians turn to finder.com.au every month to help them save money, time, and make important life choices. We compare virtually everything from credit cards, phone plans, health insurance, travel deals and much more.
Our free service is 100% independently-owned by two Australians Fred Schebesta and Frank Restuccia. Since launching in 2006, we’ve helped our users make more than 17 million decisions.
We continue to expand and launch around the globe, and now operate in the United States and United Kingdom.