Term deposits are proving popular, with rates rising and the stability attracting savers who are tired of satisfying complex conditions tied to bonus or promotional bank accounts. The average one-year term deposit pays around 3.6%, which is above the figures seen for most of the past decade. Some providers are offering more than 4%. Although these returns are slightly lower than some high-interest savings accounts, term deposits provide guaranteed returns with no attached conditions.
For more than ten years, term deposits delivered minimal returns, making them an unattractive choice for those wanting their money to work. This has changed in recent years as the Reserve Bank of Australia signals no immediate intention to lower rates. With inflation data delaying the expected timeframe for rate cuts until after 2025, banks are slowly increasing term deposit rates to attract savers who want clear, steady returns without surprises.
There are still important factors to consider. Savers should avoid locking in with a single provider, as some of the most competitive rates are offered by smaller banks rather than the big four. Many term deposits also roll over by default into lower-rate products unless customers act beforehand. If early access is required, penalties often apply. A strategy such as splitting deposit amounts across staggered terms, referred to as laddering, can help maintain flexibility as the market shifts.
The trend is also appealing to younger investors and self-managed super funds, who are now allocating more cash as part of a broader investment approach. With solid rates and limited risk, term deposits currently present an appealing option, bypassing market volatility and the convoluted rules of typical savings accounts.
