New term deposit market leader emerges in a quiet week of rate movements

With no RBA meeting scheduled this month, and no rate changes slated to take place until at least the third quarter – according to major bank economists – term deposit providers have been less inclined to make major adjustments to their offered rates. 

CommBank and Westpac are fully priced for a September rate cut, while ANZ and NAB believe the cash rate will move down in November. 

Other experts, however, cut bets that the Reserve Bank would lower the benchmark rate this year, pencilling in cuts to materialise in 2025 off the back of stubborn inflation and concerns of a resurgence in consumer prices.

While cost pressures are beginning to ease and track towards the band the RBA finds ideal, the underlying data indicates that the central bank may encounter “last mile” challenges – elevated services and non-tradables – before it can finally slay the inflation dragon. 

Further, the latest inflation figures in the US, which revealed prices accelerated faster than expected, will likely give the RBA more reasons to keep its tightening bias and wait until inflation returns to target before delivering a rate cut.   

But whether it happens later this year or earlier next year, rates are expected to move down, with only a substantial shock to Australian inflation enough to alter this forecast. 

As such, recent term deposit rate movements have been trending lower for long-term products, but higher for those ending on shorter terms.   

Customer-owned Challenger Bank and Bank First hope to entice more depositors to lock their funds in short-term products as they boost rates this week.

Challenger Bank offers top rate on 6-month term deposit

After slowly inching rates up, the latest of which was a 5 basis point hike this week, Challenger Bank has officially ditched Gateway Bank behind to become the sole market leader in the six-month term deposit space.

The bank’s six-month term deposit now offers a 5.20% p.a. return after six rate hikes this year. 

The minimum deposit is $25,000 for new depositors – $5,000 for existing customers – and the maximum is $1 million, payable at the end of term. 

Using InfoChoice’s term deposit calculator, a $25,000 deposit at 5.20% p.a. could return $650 (before tax) by October – not bad especially if the cash rate would indeed be lowered a month before or after that. 

This comes amid news that reverse mortgage provider Heartland Finance is set to takeover Challenger Bank, subject to regulatory approval.

Heartland is bullish on the move, expecting it to be finalised by the end of April.

Bank First boosts term deposit rates

The Victoria-based mutual bank joined this week’s action, bumping the rates on its short- to mid-term deposits. 

• 3 Months: up 5 basis points to 4.60% p.a.
• 4 Months: up 5 basis points to 4.60% p.a.
• 6 Months: up 10 basis points to 4.75% p.a.
• 9 Months: up 10 basis points to 4.75% p.a.

All term deposit products have a minimum deposit of $500, topping at $10 million; interest is payable at maturity.

Bank First also applied a 10 basis point increase to its one-year TD, bringing its rate up to 4.75% p.a.

Arab Bank Australia moves rates down

Meanwhile, Arab Bank decided to bring the rates down on six- and nine-month term deposits after applying as much as 10 basis points cut this week. 

The bank’s top rate for six-month TD offers a 4.95% p.a. return on deposits starting at $10,000 to $50,000. 

Depending on the deposit size, new rates range from 4.10% p.a. to 4.95% p.a.

Australian Unity varies term deposit rates

Melbourne-based mutual bank Australian Unity hiked the rate on its three-month term deposit by 20 basis points to 4.75% p.a.

On the other hand, a 20-basis point cut was applied across its range of one-year deposit products. 

The bank’s 12-month term deposit paying interest monthly now offers a 4.79% p.a. return, while the one with interest payable at the end of term features 4.80% p.a.

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Bernadette Lunas

Finance Journalist

Bernadette is a journalist with years of experience covering topics in macroeconomics, real estate, and lifestyle beats for notable print media organisations. She joined the InfoChoice Group in 2024, bringing her passion for writing stories that help Australians make better decisions about money.

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