- The market's leading term deposit rate of 5.70% p.a. has been cut by 50 basis points
- Rabobank slashed its five-year rate as part of a round of term deposit rate cuts on Tuesday
- Term deposit rates have been heading lower across the market over the past week or so
The product had topped the term deposit market for some months, albeit for deposits of more than $500,000 to $2 million.
It has now been slashed to 5.20% p.a. - a 50-basis point hit - when interest is paid annually.
It's among a round of hefty cuts to Rabobank's longer-term (one to five year) term deposit rates announced on Tuesday, while terms under a year have seen more modest adjustments.
Here's a selection Rabo's new rates for deposits between $1,000 and $100,000:
| Term | New rate (% change) | Interest paid |
| 3 months | 4.75% p.a. (+0.05) | End of term |
| 6 months | 4.90% p.a. (-0.05) | End of term |
| 9 months | 4.85% p.a. (-0.15) | End of term |
| 1 year | 4.95% p.a. (-0.20) | Annually |
| 2 years | 4.75% p.a. (-0.25) | Annually |
| 3 years | 4.80% p.a. (-0.30) | Annually |
| 4 years | 5.00% p.a. (-0.30) | Annually |
| 5 years | 5.10% p.a. (-0.40) | Annually |
Term deposit rates tumbling
The Dutch-owned agricultural bank joins several others across the market dropping term deposit rates over the past fortnight, although not all movements have been quite so dramatic.
On Friday, the Westpac group (including St George, Bank of Melbourne, and BankSA) sliced up to 60 basis points off its one-to-three year term deposit rates.
Westpac's new 12-month rate is 4.75% p.a. for deposits between $5,000 and $2 million with interest paid at maturity.
This is separate to its current special offer rate of 5.25% p.a. for 12 months for existing Westpac customers opening or renewing online only.
Other rate movers
Over the past week, other banks dropping term deposit rates include:
- Bank of Queensland (cut Premier Investment rates by up to 20 basis points while adding up to 25 basis points to its app-only myBOQ short-term term deposit rates)
- Great Southern Bank (by up to 25 basis points)
- The Mutual Bank (by 10 basis points)
- Bank Australia/Qudos Bank (by 5 basis points)
Others have made cuts while also boosting promotional rates.
Merger partners People First and Heritage Bank dropped their 12-month rates but added 85 basis points to their seven-month rate, taking it to 5.35% p.a. for deposits over $5,000 (People First) or over $1,000 (Heritage) with interest paid at maturity.
Others having bets each way include:
- RACQ Bank
- Summerland Bank
- Bank First
Why are term deposit rates dropping?
Like fixed home loan rates, banks set term deposit rates based on how they see future Reserve Bank cash rate movements play out.
The downward movement of rates in the last fortnight suggests some rate-setters are forecasting lower interest rates ahead.
Of the big bank economists, only Westpac is sticking with its prediction of two more interest rate increases in 2026 while its big four counterparts are not expecting any more rate increases in the current tightening cycle.
All expect the Reserve Bank will begin cutting the cash rate by the second half of 2027.
It seems banks are tempering their term deposit rates accordingly to ensure they won't be paying out over the odds when future deposits reach maturity.
Next month's Reserve Bank monetary policy board meeting may provide more clarity on the direction of interest rates in 2026 after the RBA declared in June it was prepared to further raise the cash rate "if required".
Markets are currently pricing in a 19% chance of a 25-basis points increase in August, which would take the cash rate to 4.60%.
The monetary policy board will meet on 10-11 August.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
