The highest term deposit rate in Australia is back down to 5.20% p.a, after Credit Union SA slashed rates this week.

That 5.25% p.a return will be mourned across Australia, but many will draw solace from Great Southern Bank (GSB) taking six month, nine month and one term deposit rates to 5.20% p.a.

For nine months and one year, GSB is out in front, while it drew level with Challenger Bank for six month terms.

In another notable bit of news this week, Challenger is now called 'Heartland Bank' after an acquisition by the New Zealand bank of the same name.

Heartland Finance had already been offering reverse mortgages in Australia, but became the first Kiwi institution to obtain an Australian banking licence after the acquisition. 

Great Southern Bank boosts rates up to 25 bps

Term length Deposit size Payment frequency Interest rate (Change)
Six months $5,000-$99,999,999.99 End of term 5.20% p.a (+0.25)
Nine months $5,000-$99,999,999.99 End of term 5.20% p.a (+0.25)
One year $5,000-$99,999,999.99 End of term 5.20% p.a (+0.20)

GSB also offers these products with monthly interest repayments at 5.10% p.a, which is still above the majority of competitors.

While we don't know for sure, it's tempting to deduce this decision has something to do with the Q1 CPI inflation numbers, which came in hotter than forecast last week, pointing towards the cash rate staying higher for longer.

GSB also boosted rates on its Platinum Plus TD accounts, which are only for over-55s, but offer a maximum rate of 5.30% p.a, the highest rate in Australia per Savings.com.au's market research.

Credit Union SA varies rates up to 95 bps

Term length Deposit size Payment frequency Interest rate (Change)
Seven months $5,000-$99,999,999.99 End of term 4.30% p.a (-0.95)
Eight months $5,000-$99,999,999.99 End of term 4.90% p.a (+0.90)

It was nice while it lasted, but the market leading rate from Credit Union SA is no more after a near full percentage point cut.

It's been about six weeks since the surprise rate dropped, and in that time it's probably safe to say plenty of eager TD fans jumped on board, locking in for a tidy cash injection come the end of the year.

The rate reduction could be a signal from the institution that it's satiated its appetite for deposits - for now

Rabobank hikes rates up to 40 bps

Term length Deposit size Payment frequency Interest rate (Change)
Six months $1,000-$2,000,000 End of term 5.00% p.a (+0.15)
One year $1,000-$2,000,000 End of term 5.00% p.a (+0.25)
Two/Three years $1,000-$2,000,000 Annually 4.50% p.a (+0.10)
Four years $1,000-$2,000,000 Annually 5.00% p.a (+0.40)
Five years $1,000-$2,000,000 Annually 5.10% p.a (+0.20)

The headline from the rate increases from Rabobank this week was major boosts to returns for four and five years.

Most providers have pivoted in the past few months to higher rates on lower terms, with the expectation that cuts to the RBA cash rate will begin before the end of this year.

For example, InfoChoice Group database analysis reveals the average 5-year rate in April was 4.10% p.a. - down from 4.25% in March.

Contrast this with 9-month terms, which have an average of 4.90% p.a. - an increase of 7 basis points from the month prior.

While Rabobank still pumped up the rates on six month terms, its highest rate is on five year term deposits.

The 5.10% p.a return is only 10 basis points behind Heartland Bank's six month rate, which is the highest in Australia at the moment per Savings.com.au's market research.

A $10,000 deposit today would return $510 a year until 2029, with an eventual ROI over 25%, and these interest repayments come annually as well so you don't need to wait half a decade.

This could provide opportunity cost to make other investments, but of course, interest earned is subject to tax.

Judo hikes rates up to 25 bps

Term length Deposit size Payment frequency Interest rate (Change)
Three months $1,000-$999,999 End of term 4.90% p.a (+0.05)
Two years $1,000-$999,999 End of term 5.10% p.a (+0.25)
Three years $1,000-$999,999 End of term 5.00% p.a (+0.15)
Four/Five years $1,000-$999,999 End of term 5.10% p.a (+0.25)

Something is clearly afoot, with Judo following Rabobank's lead and significantly boosting returns on four and five year term deposits.

The Q1 CPI read made analysts like CommBank's Gareth Aird predict rate cuts would be pushed back, but that's push back as in a couple of months, not several years.

However, Warren Hogan, Chief Economic Advisor at Judo, said this week that not only should the RBA not cut rates in 2024, but that Australia needs three more hikes to truly curb inflation.

"We're coming up to two years since [the RBA] started hiking rates and it just doesn't look like it's getting the job done," he told the Savings Tip Jar podcast.

"Ultimately, it looks like we may need to get that cash rate up to around 5[%]."

It's not what any mortgage holder wants to hear, but among the TD crowd the hint of more rates like these unveiled by Judo this week could be more exciting.

St George and subsidiaries hike 50 basis points

Term length Deposit size Payment frequency Interest rate (Change)
One year $1,000-$2,000,000 End of term/Semi annually/monthly 4.80% p.a (+0.50)

This product is available at St George, BankSA and Bank of Melbourne. 

Bank of Sydney boosts rates up to 15 bps

Term length Deposit size Payment frequency Interest rate (Change)
Three months $1,000-$1,000,000 End of term 4.90% p.a (+0.10)
Six months $1,000-$1,000,000 End of term 5.15% p.a (+0.05)
Nine months $1,000-$1,000,000 End of term 5.05% p.a (+0.05)
One year $1,000-$1,000,000 End of term 5.05% p.a (+0.15)

Bank of Sydney was another of the old guard to boost rates this week, taking six month terms to within touching distance of the market leaders.

Having briefly touched the heights of 5.50% p.a last year, Bank of Sydney is one to watch if this recent upward trend to TD rates keeps going.

Other movers

  • BCU hikes rates 20 bps
  • Teachers Mutual and subsidiaries boost 3-5 month terms by 125 bps, 6 months by 65 bps.
  • Beyond Bank cut rates up to 30 bps

Picture by Andre Taissin on Unsplash