Highest term deposit rates January 2022

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on November 01, 2021
Highest term deposit rates January 2022

Term deposit rates are pretty low at the moment, but that doesn’t mean you can’t snap up a better rate for yourself.

Term deposit comparison

Savings has collated some of the highest term deposit rates available this month for both long and short term deposits. Specifically, we’ll cover: 

High short term deposit rates – six months 

Note that the advertised interest rate is per annum – once a year. So for a six month deposit, you’d actually earn half of that.

High one-year term deposit rates

Read this article on how the frequency of interest on term deposits can affect your final amount.

High two-year term deposit rates

High three-year term deposit rates

There’s plenty of competition among three-year deposits, but you can currently get similar interest rates for two-year terms.

High five-year term deposit rates

Compare ANZ, CBA, NAB and Westpac term deposit rates 

You can see in the table below the term deposit rates from ANZ, Commonwealth Bank, NAB and Westpac don’t fare as well as some of the rates above.

In fact, the Reserve Bank’s monthly Retail Deposit Rates data showed the average big four (plus Macquarie) term deposit interest rate across all terms has dropped to below 0.50%. This is much lower than many of the interest rates shown here and is actually below the rate of inflation.

Extra guides & resources:

Term deposit rates in Australia

Term deposits are by definition a simple product: you deposit a stash of money in an account for a fixed period of time and earn a fixed rate of interest. They’re offered by Authorised Deposit-Taking Institutions (ADIs) which means up to $250,000 of your money will be guaranteed in the rare event the institution goes bust. At the end of the fixed period, you could either reinvest the money in the same or a different deposit, or you could cash out and, say, splash out your interest earnings on a beach holiday or something.  

That beach holiday would need to be pretty cheap though, as term deposit rates aren’t exactly mind-blowing at the moment. Thanks to Australia’s historically low-cash rate that’s more stagnant than a muddy mozzie-infested pond, term deposit rates are also at all-time lows. You’d be forgiven for forgetting that term deposit rates used to be around 17% in the late 80s. 

That doesn’t mean you shouldn’t look around though. If you don’t, you run the risk of being stuck with a bludge of an interest rate, and unlike savings accounts, you often can’t get your money out without copping an early withdrawal penalty and/or serving a 31-day notice period. 

What affects a term deposit’s interest rate? 

Each provider has several if not dozens of term deposit products with varying rates. This leads to a huge variety of interest rates. For example, you could get a one-year term deposit rate higher than 1.00% but also as low a 0.50% or less. That’s a big difference. On a $10,000 term deposit invested for one year, that difference in interest rates could result in a difference of over $50 in interest. 

There are a multitude of different factors that impact a term deposit’s interest rate, which we explain in greater detail here. To give a quick summary, there are as many as seven factors influencing the day-to-day interest rates of term deposits:

But remember when you take out a term deposit, your interest rate is fixed, which means locked in. Hypothetically, the bank could drop its interest rates to 0.01% and you’d still have the same interest rate you did at the beginning until your term has expired. 

Have rates always been this low? 

Not at all. Just back in 2009, the average big four term deposit rate was 5.25%, when the RBA cash rate was 7.2%. In fact, a few decades ago you could get your hands on a term deposit with an interest rate of 17%. Today’s deposit rates really pale in comparison with interest rates of the past. 

Of all the factors that influence a term deposit’s interest rate, the cash rate is arguably the most crucial. Some banks will choose to not pass on cash rate changes to customers, but most do, so when the cash rate moves, so do term deposits rates. 

Pros and cons of term deposits

a. Benefits of term deposits

  • They’re generally considered to be a safe and stable investment
  • Virtually no risk – you have a government guarantee of up to $250,000
  • Fixed rates so you know exactly what your returns will be ahead of time
  • Your money is locked away, so there’s no temptation to spend it
  • Very few have upfront or ongoing fees
  • No effort to maintain – set and forget!

b. Disadvantages of term deposits

  • Interest rates are low at the moment 
  • Fixed rates so your rate won’t rise if the cash rate rises
  • They’re not a flexible option and have very few features
  • Not being able to withdraw your money easily isn’t ideal at times when money is short
  • There are hefty interest rate reductions for early withdrawals
  • Generally no ability to top up term deposits with extra cash

Savings.com.au’s two cents  

If you’re a keen term deposit investor, make sure you check this page before opening a new one or when your current term deposit is about to expire. Term deposit rates are always changing, so make sure you keep coming back to our term deposit rates and term deposit news pages, which collate all our latest term deposit market updates.

Photo by Samuel Zeller on Unsplash. Originally published by William Jolly. Updated by Alex Brewster 7/1/2021.

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Aaron joined Savings.com.au in 2021. He is a finance journalist with a keen interest in property, the share market, and improving financial literacy in young Australians.

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