Why are term deposits getting more popular in 2016
Demand for term deposits is surging in 2016, the Reserve Bank of Australia has reported. Every three months, the RBA reports on its policy settings, interest rates and monetary settings. The latest report, issued on Friday 4 November, points out that Australian savers are turning to term deposits in greater numbers than in previous years. Recent growth in bank funds is being partly “driven by term deposits” said the RBA.
Why are term deposits becoming more popular?
Term deposits are a favourite investment for many Australians. They are government guaranteed (up to $250,000 per person, per ADI), easy to understand and easy to obtain. Term deposits are usually fee-free and have a “tried and trusted” reputation. You can opt to reinvest your interest, and grow your savings more quickly, or withdraw the interest for income.
However in recent years, term deposit rates have fallen, along with other rates, cutting returns for savers. Many term deposit rates have fallen below some at-call savings account rates.
The RBA said that for several years term deposit rates have been relatively low compared to interest rates on bonus saver accounts. Now that is all changing.
“Consistent with interest rates on term deposits becoming more attractive than other deposit types, stronger growth in term deposits has been observed more recently,“ reported the RBA.
What is the outlook for term deposit rates?
Best 3 month term deposit rate: Right now (in early November 2016) the highest 90 day term deposit rate available is 2.75 per cent p.a. from Arab Bank Australia and Move.
Best 6 month term deposit rate: The highest 180 day term deposit rate now available is 3.10 per cent from ME Bank.
Best 12 month term deposit rate: The highest one year term deposit rate in the market now is 3.0 per cent from six institutions. Check out 12 month term deposits here.
Best 2 year term deposit rate: The highest two year term deposit rate now in the market is 3.20 per cent from ANZ Bank and People’s Choice Credit Union.
You can compare term deposits from all of Australia’s significant banks, credit unions and building societies here.