Riding the term deposit rate rollercoaster: Several cuts, a few hikes

Term deposit rates have been trending lower on account of economic indicators pointing to the potential end of interest rate increases. 

For instance, the latest ABS wage price index (WPI) released this week showed wages were increasing faster than prices, jumping 4.2% in the 12 months to December. 

However, with a Board still uneasy about the risks of cutting rates too soon, despite inflation falling faster than expected and Australia’s unemployment rate hitting a two-year high, the market may have to play with the cards they’re dealt for a few more weeks or until the RBA holds its meeting on 18-19 March.

The February minutes released this week revealed the RBA considered a hike in February.

The minutes note, “It was not yet possible to rule in or out further increases in interest rates.”

Ultimately, the RBA decided to keep the rates unchanged at 4.35% as the February forecasts and datasets suggested “the risk of inflation not returning to the Board’s target within a reasonable timeframe had eased”.

Major bank economists, however, maintain their position that the RBA will begin the easing cycle this year, with a first rate cut happening in mid-2024. 

“While the on‑hold decision was universally anticipated in February, we expected the Board to still debate the case to raise the cash rate,” said Gareth Aird, CBA head of Australian economics. 

“We remain comfortable with our call for an easing cycle to commence in September 2024. Our base case has 75 basis points of rate cuts in our profile in late 2024 and a further 75 basis points of easing in H1 ‘25, which would take the cash rate to 2.85%.”

NAB, which is pencilling in a much later start to rate cuts, beginning in November, said, “While wider signs the economy is moving back towards balance are likely to be enough to prevent the RBA pursuing further rate rises, we expect the Board to take a cautious approach to easing policy settings.”

“By November, the combination of higher unemployment and inflation nearing the target range should be enough for the RBA to begin to move, with the cash rate gradually cut back to around 3% by end-2025,” NAB senior economist Taylor Nugent said. 

In line with these forecasts, several banks, from the big four to smaller outfits, have been cutting rates on their term deposit products; others, however, have boosted their offerings. 

Here are details on the term deposit rate movements in the week ending 23 February. 

CommBank varies rates on 8-month term deposits, cuts special offer rates

One of Australia’s four major banks altered the rates on its standard term deposit products by 5 basis points. 

CommBank’s eight-month term deposit rates varied depending on deposit size and payment frequency.

CommBank also wielded the axe on its top-rate special offer term deposit product available for existing customers.

The one-year term deposit dropped 5 basis points this week, leaving the rate at 4.75% p.a.

ANZ slashes Advance Notice term deposits by up to 63 basis points

ANZ has abandoned its top-rate term deposit offering after slashing rates this week.

The bank, which recently got the green light from the Australian Competition Tribunal to acquire Suncorp’s banking arm, decided to make a 63-basis-point worth of cut on the 4.88% p.a. rate offered on its eight-month term deposit product paid at maturity. 

Judo Bank boosts rates after a series of cuts

Judo Bank has put down the axe this week, hiking its rates for the first time this year. 

After a series of cuts, the last of which happened just a fortnight ago, the challenger bank has left its once-market-leading rate of 5.35% p.a. on 12-month term deposit to 5.00% p.a. 

But after this week’s adjustments, Judo Bank’s top-rate offering is now only 10 basis points behind the current leaders G&C Mutual Bank and Qudos which offer 5.20% p.a. return for term deposits with one-year terms. 

BCU Bank varies rates by up to 130 basis points

Customer-owned BCU Bank mixed up the rates on its Regular Income term deposit products paying interest monthly.  

It lowered the rates on its three- and six-month term deposits by 5 basis points, leaving them at 4.30% p.a. and 4.40% p.a., respectively. 

Seven basis points were cut from its seven-month term deposit, bringing the rate down to 4.30% p.a.

BCU Bank, on the other hand, brought the rate on its eight-month TD closer to major banks Westpac and NAB’s 4.88% p.a. offering, after boosting it by 130 basis points to 4.80% p.a.

Other movers:

• The Mutual Bank varies term deposit rates by as much as 60 bps.
• Greater Bank varies term deposit rates by up to 50 bps.
• Newcastle Permanent varies rates by 50 bps.
• Community First Bank varies rates by 25 bps.
• Horizon Bank cuts term deposit rates up to 50 bps.
• The Mac slashes rates by up to 20 bps.
• MOVE Bank lowers fixed term deposits up to 10bps.

Read more: 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.

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