Term deposit rates remained fairly flat last month, with 18 out of the 90 providers we track cutting rates for at least one term and 9 providers making improvements. At the time of writing, the average 12 month rate - which has not seen an improvement since December 2018 - sits at just 0.48% p.a.
At the moment, there are only a handful of worthwhile offers left for those looking to lock away their savings. Market leader Judo Bank currently offers rates of between 1.20% p.a. and 1.60% p.a. on 2 to 5 year terms. Also worth mentioning is MyLife MyFinance, which offers rates as high as 0.85% p.a. on 12 month investment options.
Peter has been working in the Australian banking and finance industry for over 20 years and oversees Mozo’s extensive product database. He is regularly sought out for his expert commentary and analysis on banking and interest rates trends by print, radio and TV media.
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Invest in highly rated Australian bonds. *Total Return for the 10 years to 31 August 2021 and 5.58% p.a. since inception on 29 March 2011. Past performance is not indicative of future performance. The fund is not a bank or term deposit.
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Term deposit interest rates resources
Reviews, news, tips and guides to help find the best term deposit for you.
Put simply, a term deposit is a low risk way to make the most out of your savings. If you aren’t a financial risk taker and you’ve got a stash of money lying around that you don’t use, it could be lying in a term deposit and earning high interest. By putting your money away for a set term and at a set interest rate, a term deposit allows you to maximise your savings with little effort. The only catch is that unlike in a savings account, while your money is in a term deposit, it's off limits!
Types of term deposit interest rates
The interest rate on a term deposit will usually be determined by how long you’re willing to lock your savings away. Below is a basic overview of the different types of term deposits and what interest rates you can expect with each, or, you can visit our term deposit generator for a rundown of all the options available to you.
Short term
Short term deposits usually come in periods of one, three or six months. They’re perfect if you’re looking to maximise your savings before you spend them on something like a new car or overseas holiday. Generally, banks will offer lower interest rates for shorter terms.
Long term
If you’re in it for the long haul, you can usually choose a period of one, two or five years. Interest rates are usually higher on long term deposits, so if you’ve got a large amount of money that you can afford to put away for a while, this is a great investment.
Rollover deposit
When your original term is up, you may choose to leave your savings where they are and let your deposit rollover into another term. This is a great way to maximise savings if you’ve found you don’t miss having access to the money, but it's important to check that the interest rate of your rollover term is the most competitive available to you. If not, it may be better to withdraw it and start afresh.
Peter Marshall has been working in the Australian banking and finance industry for over 20 years and oversees Mozo’s extensive product database. He is regularly sought out for his expert commentary and analysis on banking and interest rates trends by print, radio and TV media.
FAQs about term deposit interest rates
So you know what a term deposit is and how it works. Now let's get down to the details. Here are some frequently asked questions about term deposit interest rates to help you when choosing somewhere to stash your hard earned savings.
Because your term deposit works on a fixed interest rate, it will remain the same, no matter what the market is doing at the time. This means that while your investment is safe from any drops in interest rates, it also won’t benefit from any rises. That’s why it’s so important to shop around for a good interest rate on your term deposit and choose a term that is best going to help you reach your savings goals!
They each have their advantages and disadvantages, so it really depends on what you need. You can check out our comparison of term deposits vs saving accounts, but here are the main differences as far as interest rates go: Because term deposits are at a fixed interest rate, they aren’t affected by drops or rises in the market. So if interest rates fall, you will keep collecting interest as if it never happened, but if interest rates rise, term deposits won’t see the benefits like a savings account would. And with long terms, you may come to regret locking in at a certain interest rate in two or three years time.
Usually, term deposits will pay interest either annually for longer investments, or, for shorter time frames, at the end of the term. The interest rate won’t change depending on which you choose, so it doesn’t make a difference to how much interest you earn, but it does give you a choice of when you will see the payments roll into your account.
Usually, your interest will be paid via direct credit into your nominated account, similar to a savings account. One thing to remember is that if your bank’s interest rate for term deposits isn’t great, you might want to look further afield for a better deal. In this case, make sure that the bank you're opening a term deposit with will pay the interest into your chosen account (some banks won’t!).
When your term deposit matures, you’ll have the option to either withdraw your savings so you can start using them again, or renew your term deposit to keep saving. If you’re renewing, make sure you check that the new interest rate you’ve been offered is the most competitive on the market.
One of the reasons a term deposit is such a great motivation not to dip into your savings is that if you make a withdrawal before the term is up, you will be charged a fee. It also means that banks may reduce the interest paid on your deposit, called an interest rate adjustment.
Usually, this is calculated depending on how long you left your savings in the term deposit and will vary from bank to bank. The earlier you make the withdrawal, the lower the interest rate. For example, if you withdraw your savings halfway through a 12 month term, you may only earn 40% of the interest you otherwise would have in those six months.
One of the most important things when applying for a term deposit is shopping around to find the best interest rate. It’s well worth taking the time and effort to research the best option for your preferred term, because the interest you’ll earn is what a term deposit is all about. To make it a little easier for you Mozo has developed these great tools:
Term deposits comparison page - find out what term deposits are currently on offer and compare interest rates for a range of terms, from one month to five years. This is the first stop in finding a great term deposit.
Term deposits calculator - enter your details into our handy calculator to see how much interest you could be earning with a term deposit. This is really great if you want to compare how much interest you will earn with different terms or interest rates.
Term deposits search - use this quick and easy search tool to compare all the term deposit offers on the market by entering in how much you’d like to deposit and how long you’d like to leave it there.
And for more information on what interest rates are and how they work, check out our interest rates guides.
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Important information on terms, conditions and sub-limits
Terms, conditions, exclusions, limits and sub-limits may apply to any of the insurance products shown on the Mozo website. These terms, conditions, exclusions, limits and sub-limits could affect the level of benefits and cover available under any of the insurance products shown on the Mozo website. Please refer to the relevant Product Disclosure Statement and the Target Market Determination on the provider's website for further information before making any decisions about an insurance product.
