New market-high term deposit rates as odds of cash rate hike firm
- Gateway Bank has raised select term deposit rates, including a new market-equalling 12-month rate
- The customer-owned bank joins almost two dozen banks adjusting term deposit rates as odds of another cash rate increase firm
- Markets are now pricing in a 66% chance of a Reserve Bank cash rate hike in September
Gateway lifted select shorter-term rates on Wednesday, matching the market's best 12-month term deposit rate of 5.40% p.a.
Here's the latest Gateway changes for minimum deposits of $1,000:
| Term | New rate | % change | Interest paid |
| 3 months | 5.00% p.a. | (+0.05) | End of term |
| 6 months | 5.35% p.a. | (+0.10) | End of term |
| 12 months | 5.40% p.a. | (+0.05) | End of term |
It follows an earlier increase of five basis points on Gateway's six-, nine-, and 12-month rates late last week.
Gateway's term deposit rates are regularly among the market's most competitive, jostling with other smaller deposit-takers to offer the market's highest rates.
See also: Compare high-interest term deposits
What is a good term deposit rate?
Here's a look at some of the market's highest term deposit rates, 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. (Judo Bank, Bank First - 270 day deposit)
- 12 months - 5.40% p.a. (Gateway Bank, Heartland Bank, Bank Australia)
- 2 years - 5.55% p.a. (Unity Bank)
- 3 years - 5.40% p.a. (Judo Bank)
- 4-5 years - 5.50% p.a. (Judo Bank)
These rates are for end-of-term or annual interest, with lower rates generally applying for more frequent interest payments.
The market's best term deposit rates are typically offered by smaller, often customer-owned banks.
Despite this, major banks continue to hold the vast majority of Australia's household deposits, thanks largely to the trust factor associated with bigger brand names.
However, it's worth noting all authorised deposit-taking institutions are covered by the federal government's financial claims scheme that guarantees to return up to $250,000 in customer deposits at each institution should a bank, or banks, go under.
For this reason, some customers choose to limit their deposits to that amount at any one bank to safeguard their funds.
Term deposit market on the move
As odds of a hike to the Reserve Bank cash rate have firmed in recent weeks, banks have been positioning their term deposit rates accordingly.
Generally speaking, shorter-term rates can be expected to increase on the prospect of an imminent cash rate hike as banks compete to attract and secure deposits.
But this needs to be weighed up against what competitors are doing - many banks will raise rates for some terms and drop them for others in a bid to find their niche in the market.
Since the hotter-than-expected July inflation data was released on 26 August, close to two dozen banks have adjusted their term deposit offerings, including some of the bigger players.
See also:
- ANZ cuts market-leading term deposit rate as big 4 banks align
- Macquarie lifts 12-month term deposit rate above the big four
While interest rates increases are not good news for people paying mortgages, they can be welcomed by those holding cash.
Expectations of September cash rate hike firm
Markets are now pricing in a 66% chance of a 25-basis point increase to the cash rate at the Reserve Bank's September meeting on 28-29 September.
Some economists are tipping it will be followed up by a second rate rise from the November meeting, with the announcement due on Melbourne Cup Day.
On Tuesday night, deputy RBA governor Andrew Hauser appeared in a rare television interview, reiterating the central bank's mantra that inflation is "too high".
"And the question now, frankly, for us, is have we done enough or is more needed?" he said.
Some analysts interpreted the remarks as preparing the ground for a September rate hike.
Late yesterday, before Mr Hauser's interview was aired, Westpac economists got on board with their big four counterparts in forecasting another cash rate increase.
Westpac is slating the next cash rate rise in November but said the probability of a September increase is "not zero".
Westpac chief economist Luci Ellis, a former RBA deputy governor, said the September decision may see a split vote, with some members coming into the meeting with different views about supply capacity and the state of the labour market.
August unemployment data is due to be released the week before the September meeting while monthly inflation data is not scheduled until the day after the meeting concludes.
Dr Ellis suggested this was one reason the Reserve Bank's monetary policy board may hold in September, preferring to wait for key full quarterly inflation data due the week before its November meeting.
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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.
| 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 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.25% 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 | – | – |
