December was a big month for term deposit rates as expectations grew that the RBA might hike the cash rate at the February monetary policy meeting.
After annual inflation jumped up to 3.8% in October and economists from both Commonwealth Bank and NAB declared a rate hike was likelier than not, the top TD returns surged back to 4.50% p.a. and beyond.
However, the November inflation figures, released earlier this week, showed prices rose less than expected through the month (0.2% while the major banks were expecting 0.3-0.4%) which might point away from that rate hike.
Senior NAB Economist Taylor Nugent said the risks to NAB's Q4 inflation forecast are now "skewed to the downside", but is nevertheless still predicting a February hike.
"Given concerns about capacity constraints and resilience in the labour market, the RBA is unlikely to be confident that cyclical conditions will be exerting sufficient downward pressure on inflation over the forecast horizon to sustain inflation in the middle of the target range," Mr Nugetn said.
While the decision from the RBA to hike or hold will likely also be dependant on the December figures (due for release January 28) a cut still appears out of the question, so competition in the term deposit market continues to heat up.
Macquarie Bank and Bank of Sydney were the two biggest names to hike this week, with several eye catching new rates.
Macquarie hikes 10 bps
| Term length | Deposit size | Payment frequency | Interest rate (change) |
|---|---|---|---|
| Six months | $5,000–$1m | End of term | 4.35% p.a. (+0.10) |
| Nine months | $5,000–$1m | End of term | 4.35% p.a. (+0.10) |
| One year | $5,000–$1m | End of term | 4.35% p.a. (+0.10) |
Macquarie Bank hiked its top term deposit rates by another 10 bps this week, taking six month, nine month, and one year rates to 4.35% p.a.
For six and nine month terms, Macquarie Bank now offers the highest rate among the top ten biggest banks in Australia by customer deposits, and moves level with Suncorp as the joint-top one year rate at the major banks.
Macquarie do offer TDs for deposits above $1 million, but the rates are lower - now 4.10% p.a. for the above three term lengths.
Bank of Sydney hikes 5 bps
| Term length | Deposit size | Payment frequency | Interest rate (change) |
|---|---|---|---|
| Six months (online only) | $1,000+ | End of term | 4.35% p.a. (+0.05) |
| One year | $1,000+ | End of term | 4.40% p.a. (+0.05) |
Bank of Sydney only hiked by 0.05%, but that was enough to take its top rate to the 4.40% mark, still one of only a few banks to do so.
That's still 10 bps behind the top one year rate in our database - Heartland Bank at 4.50% p.a. for deposits above $25,000.
AMP go to 4.3
| Term length | Deposit size | Payment frequency | Interest rate (change) |
|---|---|---|---|
| Three months | $25,000+ | End of term | 4.10% p.a. (+0.30) |
| Six months | $25,000+ | End of term | 4.25% p.a. (+0.25) |
| Nine months | $25,000+ | End of term | 4.30% p.a. (+0.45) |
| One year | $25,000+ | End of term | 4.30% p.a. (+0.5) |
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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 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.35% p.a. | At Maturity | 6 months | $5,000 | $19,999 | – | – | |||||||||||||
5.20% p.a. | At Maturity | 6 months | $10,000 | $5,000,000 | – | – | |||||||||||||
5.15% p.a. | At Maturity | 6 months | $1,000 | $1,000,000 | – | – |
