Term to Maturity Explained: 2025 Guide for Australian Investors & Borrowers

Term to maturity is more than just finance jargon—it’s a key factor shaping your investment returns, loan repayments, and overall financial strategy. As Australian markets adjust to 2025’s economic climate, understanding how term to maturity works can help you minimise risk and maximise opportunity, whether you’re eyeing a fixed-term deposit, considering a new mortgage, or navigating the bond market.

What Is Term to Maturity?

In simple terms, term to maturity refers to the remaining time before a financial instrument—like a bond, fixed deposit, or loan—reaches its endpoint, and the principal is repaid. The length of this period can significantly affect the risk, return, and flexibility associated with your money.

• Bonds: The time until the issuer repays the face value.

• Term deposits: The period your funds are locked in before you can access them without penalty.

• Loans/Mortgages: The remaining period before the debt is fully repaid.

For example, a five-year government bond purchased in January 2025 will mature in January 2030. If you hold the bond for two years, its term to maturity is then three years.

Why Term to Maturity Matters in 2025

Term to maturity has never been more relevant. With the Reserve Bank of Australia (RBA) holding interest rates steady at 4.35% into early 2025 and inflation gradually easing, the length of your investment or debt commitment can have a direct impact on returns and risks:

• Interest rate risk: Longer terms mean greater exposure to changes in rates. If you lock in a five-year fixed rate and rates rise, you could miss out on higher returns. Conversely, if rates fall, you’re protected.

• Liquidity: Shorter maturities offer more flexibility. For instance, a 6-month term deposit can be rolled over or withdrawn sooner than a 3-year term deposit, which is important if you anticipate needing cash.

• Credit risk: For bonds and corporate debt, longer maturities mean more time for something to go wrong with the issuer, so lenders and investors often demand higher yields.

In 2025, with property markets stabilising and government incentives encouraging green investments, many Australians are reconsidering the ideal term to maturity for their portfolios—balancing immediate needs against long-term goals.

Real-World Applications: Making Smarter Choices

Let’s look at how term to maturity directly affects some common Australian financial products and decisions in 2025:

Bonds and Fixed Income

Australian government bonds issued this year offer maturities ranging from 1 to 30 years. With shorter-term bonds currently yielding around 3.6% and 10-year bonds closer to 4.1%, investors must weigh the benefit of higher yields against the risk of interest rate changes and inflation over a longer period.

Home Loans

Major banks are now offering fixed-rate home loans with terms from 1 to 5 years. Choosing a shorter term to maturity on your fixed rate could allow you to refinance sooner if rates drop in 2026 or beyond. However, longer terms provide certainty in repayments if you’re concerned about future rate hikes.

Term Deposits and Savings

With competition heating up, some banks are offering bonus rates for locking in funds for two years or more. But with ongoing economic uncertainty, many Australians prefer the flexibility of shorter terms, even if it means slightly lower returns.

• Example: In May 2025, Bank A offers 5.10% p.a. for a 12-month term deposit, and 5.30% for a 36-month deposit. If you expect rates to rise, you might choose the 12-month option and reassess next year.

Strategies for Managing Term to Maturity

How can you use term to maturity to your advantage in 2025?

• Laddering investments: Staggering maturities (e.g., holding deposits or bonds that mature at different times) reduces risk and increases access to funds as market conditions change.

• Aligning with goals: Match your investment maturities with your future financial needs, such as a home deposit, education costs, or retirement.

• Review regularly: Monitor market trends and policy updates. The Albanese government’s 2025 Budget includes support for renewable energy bonds—these may offer new options for investors willing to lock in longer terms for potentially higher returns and social impact.

Conclusion

Term to maturity is a crucial but often overlooked factor in both investing and borrowing. In 2025’s evolving economic landscape, choosing the right maturity can protect your returns, provide flexibility, and help you reach your goals. Take the time to review your financial products and consider how their term to maturity aligns with your plans for the future.