Banks unveil major boosts on term deposit rates

Returns on term deposits saw a major boost this week following the RBA's decision to leave the cash rate on hold at its May meeting.

Despite being the widely expected outcome by major economists and market-watchers alike, the move was seen as a deviation from the RBA's usual manoeuvre of hiking rates whenever quarterly inflation rises 1% or greater.

The ABS Consumer Price Index (CPI) recently revealed March quarter inflation rose 1%, bringing the annualised rate to 3.6%.

Both figures came in stronger than expected, with the quarterly rate pegged at 0.8% and 3.5% annually.

Although it has kept the cash rate steady, the RBA has revised its near-term trimmed mean inflation forecasts to reflect recent datasets.

From 3.3% in June and December 2024 indicated in its February Statement on Monetary Policy (SOMP), the Reserve Bank now expects core inflation to land at 3.8%.

By June next year, it's expected to hit 3.2% rather than the previously forecast 3.1%.

Recent market jawboning has also changed the narrative somewhat from cuts expected later this year, to perhaps not seeing any at all in 2024.

Indeed much of the RBA's economic modelling relies on the cash rate remaining at 4.35% until mid-2025.

However, the Board still expects inflation to return to reach the midpoint - 2.6% - of its target range in June 2026.

Despite the RBA's noted neutral stance in its post-meeting announcement, Governor Michele Bullock, in her face time with the press, admitted that "if [they] have to" raise the rates, "[they] will".

"If we really think that inflation is going to be persistent and significantly above our forecasts, we will tighten again," she said.

"But the Board made the judgment at the meeting that the right stance at the moment is to stay where we are, continue to observe what is going on in the economy, be data-driven and as I said, we might have to raise, we might not."

The very likely possibility of rates staying higher for longer - or at least for a few more months if major bank economists were correct - has led these providers to raise rates offered to savers locking their funds in term deposits.

CommBank adjusts term deposits, unveils 'special offer' top rate

Commonwealth Bank of Australia (CommBank) leads term deposit providers in adjusting rates in the wake of the RBA's latest monetary policy decision.

CommBank's top rate of 4.90% p.a. (up 5 basis points) is offered through its 11-month 'special offer' term deposit product, available for a limited time only.

Changes applied by the bank this week were generally downwards for short-term deposits, and upwards for those on longer terms.

Rates on three- to 11-month terms with deposits starting at $5,000 are slashed by 5 basis points.

Meanwhile, those on 12 to 18-month terms are boosted by as much as 35 basis points.

CommBank, which holds the largest market share for household deposits in Australia (over $390 billion as of March 2024), recently revised its cash rate forecast for the first rate cut from September to November.

"Our base case sees the cash rate gradually cut from November 2024 to reach 3.10% at end‑2025 (a level we believe is just above neutral)," CommBank's head of Australian economics Gareth Aird said.

If that's the case, this could be a good time to stash funds in Australia's largest bank, with its economists pushing the boat out on the rate cut timeline.

Bank of Sydney offers market-leading rates on 6 and 9-month term deposits

Bank of Sydney came in hot this week with up to 20 basis points increase to bring its term deposits to the top of the market.

The bank is now the market leader for nine-month terms, offering 5.25% p.a. returns on deposits starting at $1,000 up to $1 million.

This is 5 basis points higher than the second top rate of 5.20% p.a. offered by Great Southern Bank.

Bank of Sydney has also emerged among the market leaders in the six-month term deposit space, with 5.25% p.a. returns (tied with Heartland Bank) payable at maturity.

Heartland Bank leads the 1-year term deposit space

The newly renamed bank (formerly Challenger) has also rolled out a 5.25% p.a. interest rate on its six-month term deposit.

But that isn't even the highest rate Heartland Bank offers.

Depositors seeking good returns on one-year terms can get the bank's top rate of 5.35% p.a.

The minimum deposit for both products is $1,000 - the maximum is $10m - with interest paid at maturity.

Bank First increases term deposit rates

Customer-owned Bank First is also among the providers incentivising short to mid-term savers by upping its 3, 4, 6, 9, and 12-month term deposits by 10 basis points.

The minimum deposit is $500 and tops at $100 million.

If you had $100 million deposited at 4.85% p.a. you'd stand to gain $4.85 million in interest, subject to tax of course. 

G&C Mutual Bank boosts short-term deposit rates

G&C Mutual Bank joined this week's upward movers, hiking the rates on its three- and six-month term deposits.

The customer-owned bank applied a 15 basis point increase to its three-month TDs paying monthly and at maturity.

Meanwhile, its six-month term deposits got a larger 35 basis point boost, catapulting rates north of 5% p.a.

These newly adjusted rates are available on deposits starting at $1,000 and up to $100m.

Gateway Bank moves rate up

Member-owned Gateway Bank also hiked its one-year term deposit by 10 basis points to 5.15% p.a., bringing it to the same level as the current top rate it offers through its six-month term.

The minimum deposit is $1,000, with no maximum limit.

Read more: Term Deposit News RBA Big 4 Term deposit rate changes

Bernadette Lunas

Finance Journalist

Bernadette is a journalist with years of experience covering topics in macroeconomics, real estate, and lifestyle beats for notable print media organisations. She joined the InfoChoice Group in 2024, bringing her passion for writing stories that help Australians make better decisions about money.

Email