Cuts to term deposit rates: Retirees be aware

A handful of banks are starting to quietly reverse the term deposit interest rate increases they made in August this year…

Retirees beware: it seems that the increase in term deposit interest rates enjoyed over the past couple of months may be coming to an end, with a handful of banks making significant cuts to 1 and 2 year term deposit rates over the past two weeks.

Following The Reserve Bank’s decision to cut the official cash rate to a historic low of just 1.50% in August, a number of banks made the somewhat surprising move to increase selected term deposit interest rates. For example…

Canstar-star-rating-and-awards-research--InstitutionsCommonwealth Bank has responded to the Reserve Bank of Australia’s (RBA) cash rate decision by reducing interest rates for home owners and small business while increasing term deposit rates.

  • Standard Variable Rate (SVR) mortgages reduced by 0.13%; owner occupiers to receive  record low rate of 5.22%
  • One year term deposit rate increased to 3.00%, a rise of 0.55%
  • Two and three year term deposit rates to lift by 0.50% to 3.10% and 3.20% respectively

 “Today we’ve reduced our mortgage rates to a record low while increasing term deposit rates to provide an opportunity to the millions of Australians who rely on savings…”

Source: Commonwealth Bank

Term Deposit Rates Cut

Unfortunately it appears that some of the term deposit increases announced by banks in August were temporary, with Commonwealth Bank, Bankwest and Suncorp Bank all making relatively large cuts to selected term deposit rates over the past fortnight, which will almost certainly be a trigger for other banks to consider how competitive they need to be in this space.

The table below details the decreases in 1 and 2 year term deposit rates that CANSTAR has observed on its term deposit database between 12/9/16 and 29/9/16.

12/9/16 29/9/16 Difference
1y % 2y % 1y % 2y % 1y % 2y %
AMP Bank           2.80           2.55           2.75           2.55         (0.05)                –
B&E Personal Banking           2.85           2.75           2.85           3.00                –           0.25
Bankwest           2.96           2.58           2.28           2.58         (0.68)                –
Bendigo Bank           2.65           2.75           2.60           2.75         (0.05)                –
BOQ           3.05           3.15           3.00           3.10         (0.05)         (0.05)
Commonwealth Bank           3.00           3.10           2.40           2.45         (0.60)         (0.65)
Community First CU           2.50           2.60           2.60           2.70           0.10           0.10
Delphi Bank           2.30           2.62           2.30           2.65                –           0.03
Gateway Credit Union           3.11           2.76           2.71           2.76         (0.40)                –
IMB           2.96           2.57           2.72           2.57         (0.24)                –
ING DIRECT           3.05           2.70           3.00           2.70         (0.05)                –
MyState           3.00           2.80           2.95           3.00         (0.05)           0.20
Newcastle Permanent           2.90           2.80         (0.10)                –
SERVICE ONE Alliance Bank           2.65           2.80           2.60           2.70         (0.05)         (0.10)
Suncorp Bank           2.95           3.05           2.55           2.60         (0.40)         (0.45)
The Mutual           2.90           3.00           2.80           3.00         (0.10)                –
The Rock           3.00           2.85           2.95           3.00         (0.05)           0.15

Source: CANSTAR. Based on products listed on CANSTAR database, for an investment amount of $10,000. Advertised rate – please see comparison tables for specific product details.

Compare term deposits before locking money away

As always, savers should carefully do their homework before committing their funds to a long-term term deposit. Over various loan terms, the highest advertised term deposit interest rates on CANSTAR’s database are as follows:

Term  Maximum advertised %   Term Maximum advertised %
30d 2.30 1 Year 3.05
60d 2.40 2 Year 3.20
90d 2.85 3 Year 3.25
180d 2.90 4 Year 3.25
270d 2.95 5 Year 3.25

Source: CANSTAR. Based on products listed on CANSTAR database, for an investment amount of $10,000. Advertised rate – please see comparison tables for specific product details.

Keep a close eye on rates over the next few weeks. There may be further announcements…

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