For generations, term deposits have been a go-to savings vehicle for Australians seeking stability and guaranteed returns. But with inflation, rate changes, and a rapidly shifting financial landscape in 2025, are term deposits still a smart move? Let’s break down what’s changed, how rates compare, and whether locking in your cash makes sense for your financial goals this year.
What’s New for Term Deposits in 2025?
Over the past two years, the RBA’s battle with inflation has seen interest rates swing sharply. In early 2025, the cash rate sits at 4.10%, and most major banks have adjusted their term deposit rates accordingly. The following trends are shaping the term deposit market this year:
- Competitive rates for longer terms: 12- to 24-month term deposits now offer rates between 4.2% and 5.0% p.a. at leading banks and credit unions.
- Introductory rate offers: Some banks are luring new savers with bonus rates for the first term, especially for deposits above $50,000.
- Flexible options: More providers now offer ‘breakable’ term deposits, letting you withdraw early (with reduced interest) if needed.
- Government guarantee: Deposits up to $250,000 per account holder, per bank, remain covered under the Financial Claims Scheme.
Despite these perks, Aussies are weighing up term deposits against high-interest savings accounts and even government bonds, which have become more attractive as rates rise.
How Do Term Deposits Compare to Other Savings Options?
When deciding where to park your cash, it’s crucial to look beyond the headline rate. Here’s how term deposits stack up in 2025:
| Option | Interest Rate (p.a.) | Key Features |
|---|---|---|
| Term Deposit (12 months) | 4.5% (avg) | Fixed rate, no access until maturity (unless breakable) |
| Online Savings Account | 4.1% – 4.7% | Variable rate, flexible withdrawals, bonus interest with conditions |
| Government Bond (2-year) | 4.3% (yield) | Tradable, fixed interest, minor price fluctuations |
Term deposits still appeal if you crave certainty and are happy to lock away funds. However, with inflation hovering around 3.5% in 2025, real returns (interest minus inflation) are slimmer than they first appear. High-interest savings accounts, though variable, offer flexibility and instant access, but rates can be cut with little warning. Government bonds are more accessible than ever via the ASX, offering a blend of security and liquidity.
Who Should Consider a Term Deposit in 2025?
With so many choices, term deposits aren’t for everyone. You might benefit most if:
- You want a guaranteed return, immune to market swings
- You won’t need the money for the duration of the term
- You’re managing a lump sum (e.g., inheritance, house deposit, business cash reserve)
- You value simplicity and minimal paperwork
On the flip side, if you’re actively saving for a goal and want to keep adding to your balance—or might need to access funds in a hurry—a high-interest savings account could serve you better. Those chasing higher returns and comfortable with some risk might consider ETFs, shares, or even green bonds, though these aren’t capital-guaranteed.
Tips for Getting the Most Out of Term Deposits
- Shop around: Don’t settle for your main bank’s first offer. Use comparison sites to scout for the best rates and terms.
- Stagger maturity dates: Consider a ‘ladder’ strategy—split your funds across multiple term deposits with different maturities for more flexibility.
- Check fees and penalties: Early withdrawal can wipe out much of your interest, so read the fine print before committing.
- Watch for maturity notifications: Banks often roll over your term deposit to a lower rate if you don’t provide new instructions at maturity.
The Bottom Line
Term deposits remain a safe, predictable option for Australian savers in 2025, particularly for those wary of market ups and downs. However, with rates, inflation, and competing products constantly evolving, it pays to review your options and tailor your savings strategy to your personal goals. Don’t let your money sit idle—make every dollar work for you this year.
