Savers feeling the squeeze as term deposit rates tumble – what can you do?
Despite the Reserve Bank of Australia (RBA) keeping the cash rate at 3.85 % at its last meeting, Australian banks have been aggressively trimming term deposit rates in recent weeks.
Some of the biggest cuts have come from the major banks, with NAB, Westpac, and ANZ all slashing rates across popular term lengths. Many one‑year deposits that were offering 4-5% in early 2024 have now dipped to the mid 3% range, with shorter terms hit even harder.
Average yields across all terms in Mozo’s database have now slipped below 4%, making it harder for savers to earn a return that keeps up with inflation ; right now, at 2.4%. That means prices are rising by 2.4% a year. If your term deposit earns 3.8%, your real return is only about 1.4% – and that's before tax. If your return is lower than inflation, your money is actually losing value in real terms. So while you’re earning interest, it may not be enough to keep up with rising costs.
In short: it’s getting tougher for Aussies to protect their savings, let alone grow them.
With at least one more RBA rate cut expected in the months ahead , it appears banks are moving to protect their margins – regardless of whether the cash rate stays on hold for now.
What this means for savers
| Situation | Impact | What you can do |
|---|---|---|
|
Locked-in investors
|
If you locked in a rate above 5 % in 2023-24, you're in a good position and should enjoy the higher returns while they last.
|
Let it ride and avoid breaking the term early.
|
|
New investors
|
The highest offers across all terms in Mozo’s database are between 3.65% - 4.45 %, with top rates harder to find.
|
Shop around quickly and compare across banks.
|
|
Short vs long term
|
Some short‑term rates are now similar to longer‑term ones, meaning the flexibility trade‑off isn’t as steep.
|
Consider
laddering deposits
across multiple terms.
|
Smart money moves to consider
- Lock in now if the rate is right . Term deposit rates may continue to fall ahead of expected RBA cuts, so it could pay to act sooner rather than later.
- Ladder your deposits . Spread your funds across different maturities to avoid reinvesting everything at once when rates may be lower.
- Look beyond the Big Four . Many smaller banks and mutuals are still offering more competitive rates than the majors.
- Explore alternatives . With term deposits now delivering lower yields, it might be worth considering other low‑risk income options, such as ETFs , bonds or high‑interest savings accounts , to diversify your returns.
The high-yield term deposit environment is fading fast, and savers may need to adjust their expectations. But there’s still value to be found, especially for those willing to compare offers and act strategically. Locking in a decent rate now, spreading deposits across terms, and exploring alternatives could help soften the blow of a falling rate landscape.