The new rate on nine month terms – 5.15% p.a. – is the highest rate available in Australia, matched by that on Judo Bank's six month TD.

At 5.10% p.a., Heartland's one year rate is ahead of Judo's equivalent product, which currently advertises a 5.00% p.a. return.

These eye-catching new rates represent the biggest moves in the term deposit market since both Westpac and NAB pushed their official forecasts for an RBA rate cut back to May next year.

Despite the stationary cash rate, TD returns have fluctuated over the past year as banks respond to market conditions and sentiment.

Westpac economist Luci Ellis believes recent RBA rhetoric implies a "hawkish" view of the economy and a correspondingly cautious approach to rate cuts.

"[RBA communication] suggests that they will wait for longer than we previously believed," she said.

Following November's monetary policy decision, RBA boss Michelle Bullock said underlying inflation, which excludes goods with volatile prices like fuel, remains too high.

"[Monetary] policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range," she said. 

The latest monthly CPI inflation figures show underlying inflation was 3.5% over the twelve months to October, up from 3.2% in September.

This was above forecasts from the major banks, although as a rule the RBA pay more attention to the more detailed quarterly numbers.

While all this might dismay mortgage holders, it could mean term deposit rates experience another resurgence.

Heartland Bank's new term deposit rates

Term length New rate (Change)
Three months 4.95% p.a. (+0.10)
Six months 5.09% p.a. (+0.05)
Nine months 5.15% p.a. (+0.05)
One year 5.10% p.a. (+0.05)
Two years 4.70% p.a. (+0.10)

The above rates are for deposits of at least $25,000 with interest paid at term end or annually.

Customers can receive monthly interest repayments on one year terms, but only if they accept a discount of 20 basis points off advertised rates.

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Picture by Morgan Housel on Unsplash