Time Deposits Australia 2025: Rates, Risks & Real Returns

With interest rates holding steady at multi-year highs and economic uncertainty still in the air, Australians are reconsidering the humble time deposit. But does locking your cash up for 6, 12, or even 24 months still make sense in 2025?

What is a Time Deposit (and Why Are Aussies Talking About Them Again)?

Time deposits—often called term deposits—are fixed-term savings accounts where you agree to lock away your funds for a set period in exchange for a guaranteed interest rate. Unlike regular savings accounts, you can’t touch your money until the term ends without facing penalties. In 2025, with the RBA cash rate hovering near 4.35%, Australian banks are offering some of the most attractive time deposit rates in over a decade.

Here’s why time deposits are back in the spotlight:

• Rising interest rates: Banks are competing for your deposits, pushing rates above 5% for popular terms.
• Market volatility: Share markets remain choppy, making guaranteed returns more appealing.
• Government guarantee: Up to $250,000 per account-holder, per ADI, is protected under the Financial Claims Scheme.

For example, major banks like NAB and Westpac are advertising 12-month term deposits at 5.1% p.a. as of June 2025, with some smaller banks nudging rates even higher to attract new savers.

How Time Deposits Compare to Other Savings Options in 2025

Before you rush to lock in a rate, it’s crucial to weigh time deposits against other options:

• Online savings accounts: Often offer flexible access and introductory rates, but returns may drop after a few months or if conditions aren’t met.
• High-interest transaction accounts: Some neobanks are offering competitive ongoing rates with no lock-in, but generally still sit below time deposit rates for longer terms.
• Government bonds: Australian Treasury Bonds and Exchange-Traded Treasury Bonds (eTBs) allow fixed returns but with a secondary market for liquidity.
• Managed funds and ETFs: Potential for higher returns, but come with market risk and no capital guarantee.

The main attraction of time deposits remains their predictability—your rate is fixed, your capital is secure, and your return is known upfront. This makes them appealing for retirees, first-home savers, or anyone who wants to park a lump sum safely.

Key Risks and Policy Updates for 2025

While time deposits are low-risk, they’re not entirely risk-free or always the best choice:

• Early withdrawal penalties: Breaking a time deposit can mean losing a chunk of your interest, or even some principal, depending on the provider.
• Inflation risk: If inflation spikes above your fixed rate, your real return could go backwards.
• Opportunity cost: If rates rise further, your locked-in rate could look less attractive than new offers.

In 2025, APRA and ASIC have increased scrutiny on how banks advertise term deposit rates, requiring clearer disclosure of break costs and eligibility for government guarantees. This regulatory push is designed to help consumers understand what they’re signing up for—especially as competition heats up and smaller banks seek to stand out.

Tip: Always check if your chosen bank is covered by the Financial Claims Scheme and read the fine print on early withdrawal penalties.

Who Should Consider a Time Deposit in 2025?

Time deposits may suit you if:

• You have a lump sum you won’t need for the duration of the term.
• You value certainty and want to avoid market risk.
• You’re looking for a safe place to hold a home deposit, inheritance, or emergency fund (with a defined timeline).

They may not be right if you anticipate needing your cash, or if you want to chase the highest possible returns with some risk.

Conclusion

Time deposits are enjoying a resurgence in 2025, thanks to competitive rates and renewed appetite for safe, predictable returns. They’re not for everyone, but for Aussies prioritising security and certainty, they’re worth a closer look this year. As always, compare offers, read the fine print, and make sure your money is working as hard as possible.