ANZ joins big four term deposit party but new rate steals the show

ANZ has joined its big four counterparts in lifting its flagship 12-month term deposit rate to 5.20% p.a., matching the best offers of its peers.

The rate will apply to those opting for end-of-term interest on deposit amounts between $5000 and $1,999,999, with more frequent interest payments attracting lower rates, as follows:

ANZ was the first of the big four to shift its 12-month term deposit rate in September, lowering it 10 basis points to 5.15% p.a. (down from 5.25% p.a.).

That put it in line with the best rates of the big three but in the days that followed CommBank, Westpac, and NAB each raised their top rates to 5.20% p.a., outshining ANZ's best offering.

See also: Big four term deposit rates

Here are the highest term deposit rates of the big four as they now stand - all for 12-month deposits:

(* CommBank and Westpac conditions)

Challenger banks go hard in the 12-month market

But the offerings of the big four pale in comparison to the market's new highest 12-month rate of 5.50% p.a., announced this week by two customer-owned banks Bank Australia and Bank First.

Bank Australia boosted its 12-month rates by 10 basis points on Tuesday on deposits between $500 and $3 million, paying 5.50% p.a. when interest is paid annually and 5.40% p.a. for monthly interest payments.

On Thursday, Bank First matched the rate in its new term deposit schedule which has seen some rates lift by as much as 30 basis points.

Here's a look at some of the challenger bank's new rates for deposits of $500 and over:

Bank First is also offering a new bolstered rate of 5.40% p.a. (up 20 basis points) on its one-year regular income product, providing fortnightly interest payments on deposits of $5,000 and over.

Notable new 12-month rates

Amid the flurry of rate rises on the term deposit market, Macquarie Bank also increased select rates on its digital term deposit products on Wednesday, taking its 12-month rate to 5.35% p.a.

Macquarie's relatively new digital products require deposits of between $25,000 and $1 million and generally come with more lenient conditions for early withdrawal than many traditional term deposits.

Also, on Wednesday, perennial term deposit challenger Judo Bank briefly claimed the 12-month market's best rate with its 5.45% p.a. which also applies to two- and three-year deposits where interest is paid annually.

Judo currently holds the market's top rates for four- and five-year term deposits at 5.50% p.a. with annual interest.

Judo drops its term deposit rates by 10 basis points for customers opting for monthly interest payments.

Term deposit market on the move

More than two dozen banks have adjusted their term deposit rates in September as the market lays the foundation for an expected cash rate increase at the end of the month.

The vast majority have increased rates, likely in a bid to attract and retain stable customer deposits as a source of funding in a rising interest rate environment.

The hikes also come amid decade-high bond yields which in turn dictate higher borrowing costs for Australian banks in wholesale markets.

Higher bond yields also force banks to lift their own deposit rates to compete with the rates offered by government bonds and alternative stable assets.

See also: How to buy government bonds in Australia

What are the market's best term deposit rates?

Here are some of the highest term deposit rates now on offer, according to the Savings.com.au database:

• 3 months - 5.25% p.a. (RACQ Bank)
• 6 months - 5.45% p.a. (RACQ Bank)
• 9 months - 5.40% p.a. (Bank First)  
• 12 months - 5.50% p.a. (Bank Australia, Bank First)
• 2 years - 5.55% p.a. (Unity Bank)
• 3 years - 5.45% p.a. (Judo Bank)
• 4-5 years - 5.50% p.a. (Judo Bank)

Typically, the most competitive term deposit rates on the market are offered by smaller banks and other authorised deposit-taking institutions (ADIs).

Despite this, around 70% of Australians' household deposits are currently held by the big four banks with many consumers choosing to keep their cash with well-established institutions.

It's worth noting all deposits up to $250,000 are guaranteed under the federal government's financial claims scheme in the unlikely event a smaller bank goes bust. 

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Want to earn a fixed interest rate on your cash? The table below features term deposits with some of the highest interest rates on the market for a six-month term. 

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6 months

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Bank	Term Deposit	Interest Rate	Interest Frequency	Term	Automatic Rollover	Maturity Alert	Early Withdrawal Available	Minimum Deposit	Maximum Deposit	Notice Period to Withdraw	Account Keeping Fee	Online Application	Joint Application	Tags	Features	Link	Compare	Promoted Product	Disclosure
MoveBank	MoveBank Term Deposit - 6 months	5.25% p.a.	At Maturity	6 months				$5,000	$19,999	–	–					More details	Compare
ING	ING Term Deposit (online) - 6 months	5.20% p.a.	At Maturity	6 months				$10,000	$5,000,000	–	–					More details	Compare
Unity Bank	Unity Bank Fixed Term Deposit - 6 months	5.15% p.a.	At Maturity	6 months				$1,000	$1,000,000	–	–					More details	Compare

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Personal Term Deposits - 12 months

Product Features

• Available for individual and joint accounts
• No application or monthly account fees
• Backed by an Australian Government Guarantee up to $250,000

Minimum deposit $1,000

5.45% Interest rate p.a.

12 months Term

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