Looking for a good value term deposit that doesn’t last for too long?
If you’re happy to lock your money away for no longer than a year in exchange for a relatively fair interest rate, a one-year term deposit could be suitable for you.
The table below displays a snapshot of some of the highest term deposit interest rates around for one-year terms.
*Rates correct as at 09 July 2020. Rates based on a $50,000 deposit.
12-month term deposit
As the name probably suggests, a 12-month term deposit is a fixed deposit that locks away your money for one year, which is the period of time known as the term. This means for one year you generally won’t be able to touch the money you deposit, but in exchange you will earn a fixed amount of interest over this period.
For example, a 2.00% p.a. term deposit for 12 months would return $200 in interest over the term if you deposited a total of $10,000.
12-month term deposits are considered to be the upper limit for ‘short’ term deposits. Other terms considered short-term offered by banks include any terms ranging from one-month to 11 months, with 6-month terms usually being the most popular.
Any longer than this and you’ll be getting a ‘long' term deposit, such as terms that are:
- 18 months
- Two years
- 30 months
- Three years
- Four years
- Five years
While some banks offer term deposits for up to seven years, five is more commonly the longest term offered to the general public.
12-month fixed deposit interest rates
With the cash rate as low as it is at the time of writing (0.75% as of February 2020), interest rates on term deposits are pretty poor in general at the moment. The average term deposit rate from the big four banks across all terms is just 1.15% p.a, according to Reserve Bank data, while Savings.com.au’s analysis of a broader section of the market found an average closer to 1.40% p.a.
Historically speaking, that’s very low, and one-year terms don’t fare much better. The average term deposit rate for one-year terms is 1.46% p.a, while the highest the typical customer can get (according to the table below showing a selection of high term deposit rates for one-year terms) is 2.00% p.a in January 2020.
Given the current rate of inflation is 1.80%, a lot of these one-year term deposit rates will barely even give you a real rate return (real=adjusted for inflation), so funds in a term deposit with an interest rate below the inflation rate can be considered to be going backwards in value.
But as you’ll see below, other terms don’t really fare much better.
How do 12-month deposit rates compare to other terms?
The general rule used to be ‘the longer the term the higher the rate’ and this is still somewhat true. For example, the highest five-year rate Savings.com.au could find is 2.35% p.a in January 2020, which is 35 basis points higher than the highest one-year rate.
The table below displays a snapshot of some of the highest term deposit interest rates around for five-year terms.
*Rates correct as at 07 July 2020. Rates based on a $50,000 deposit.
However, when you average out the rates offered by most banks among the different terms, one-year products seem to fare better. For example, Savings.com.au research found one-year terms had an average rate of 1.46% across the market, compared to:
- Average rate for 2-year terms: 1.44% p.a.
- Average rate for 3-year terms: 1.42% p.a.
- Average rate for 4-year terms: 1.39% p.a.
- Average rate for 5-year terms: 1.41% p.a.
The highest average Savings.com.au found is 1.52% p.a for a three-month term, but note that all rates are listed in per-annum figures, even for terms under 12 months. So for three months, the total rate of return would be a quarter of the per annum (p.a.) rate of 1.52%, which works out to be 0.38%.
The infographic below highlights the average interest rates among the different term deposit terms and how they’ve changed over the months since the Reserve Bank started cutting the cash rate for the first time in years.
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