Following the cuts delivered by big banks and notable term deposit providers, member-owned financial institutions led the latest adjustments in the fixed-rate deposit space this time around.
One bank even took out a huge axe, shedding a sizeable 70 basis points from its TD products.
If you've been keeping up with these weekly wraps, you'd know these rate drops were largely due to the decline in three-year bond yields.
With the Fed delivering its first rate cut in over four years, it's likely that this is not the end of the downturn we've seen in this space.
However, there might be some hope that things will turn around - or at least slow down the spiral.
Can we return to the glory days of term deposits?
The labour market posting another solid result (albeit largely driven by part-time work) might keep a lid on cash rate cuts.
The latest jobs print is in fact the last straw that broke CommBank's back, as Australia's largest bank revised its rate cut call from November to December following the ABS release.
Last week, the bank said, "A firmer disinflationary pulse than the RBA expects in Q3 2024 is a necessary ingredient to see the RBA commence an easing cycle this calendar year. But the evolution of the unemployment rate will also play a big role in when the central bank joins its global peers in cutting rates."
"But the August labour market data was stronger than we expected," CBA chief economist Gareth Aird said.
Dr Aird noted that the labour market is still loosening on a trend basis but conceded that the pace of loosening "is still occurring only modestly".
Despite the revision or risk of a later start, economists are still fully priced in rates going down. So the glory days for term deposits might as well be over for now.
People Choice cuts rates on popular terms
Adelaide-based People's Choice Credit Union has returned to the chopping block after almost a month to bring the rates on its 9- and 12-month term deposits down by as much as 20 basis points.
| Term | New rate (change) |
|---|---|
| 9 Months | 4.60% p.a. (-10bps) |
| 12 Months | 4.55% p.a. (-20bps) |
The minimum deposit size is $5,000 and the maximum is $1 million. Australians aged 13 and over can apply with the credit union.
Heritage Bank drops the axe on term deposits
Heritage Bank, People's Choice's merger partner, also slashed its term deposit rates this week.
The changes apply to the bank's TD products on 6-, 9-, and 12-month terms, paying monthly, quarterly, and semi annually.
Here are the new rates for Heritage term deposits paying monthly:
| Term | New rate (change) |
|---|---|
| 6 Months | 4.80% p.a. (-10bps) |
| 9 Months | 4.50% p.a. (-20bps) |
| 12 Months | 4.45% p.a. (-30bps) |
A minimum deposit of $1,000 is required to open an account.
Heritage Bank and People's Choice merged on 1 March 2023 to form People First Bank, currently the largest customer-owned bank in Australia.
BCU Bank sheds up to 70 bps from term deposit rates
NSW-based credit union BCU Bank joined in on the rate-cutting action, shedding as much 70 basis points from its term deposits.
The cuts were applied to the institution's Regular, Standard, and 55 Plus term deposits on various terms, from 3 months to 3 years.
New rates of Standard TDs paying interest earnings at the end of term are as follows:
| Term | New rate (change) |
|---|---|
| 3 Months | 4.30% p.a. (-30bps) |
| 6 Months | 4.40% p.a. (-30bps) |
| 9 Months | 4.00% p.a. (-40bps) |
| 12 Months | 3.80% p.a. (-70bps) |
Amid the cuts, BCU Bank raised its 5-month TD rates by 5 basis points.
Depositors who opt for monthly interest payments will receive 4.80% p.a., while those who choose payments at maturity will get a much higher 4.90% p.a. interest rate.
The minimum deposit for Standard and Regular Income term deposits is $1,000.
A minimum of $5,000 deposit is required for the 55 Plus TDs.
More term deposit rate cuts this week
- Community First Bank lowered 2- and 3-year term deposit rates by 10 basis points.
- Horizon Bank cut 9-month and 1- to 3-year term deposits by 10 basis points.
- Summerland Bank drop term deposit rates up to 25 basis points.
- Hume Bank slashed 9-month and 1-3 year term deposits by 20 basis points.
Photo by wirestock on Freepik
