Term Deposits - indicative of future interest rates?

I saw these term deposit interest rates:
Judo Bank: Personal Term Deposits

Term / Interest Paid at Maturity
3 Months / 1.25% p.a.
6 Months / 2.10% p.a.
9 Months / 2.45% p.a.
1 Year / 2.70% p.a.
2 Years / 3.50% p.a.
3 Years / 3.80% p.a.
4 Years / 3.85% p.a.
5 Years / 4.05% p.a.

Is this an indication of where we're heading?

 

I don't think they will get that high without crashing all the markets and wiping out everyone's gains for the past 5+ years but since I have been paying off all my debt for past few years in preparation for the zombie apocalypse here's hoping it does

We were trying to pickup one more property (large acreage) during COVID but due to the covid market going nuts we refused to overpay for land and decided to wait it out, at this point In time, that does still feel like it was the wrong call as prices kept going up after we pulled out but maybe in 2-3 years if/when the bubble deflates, maybe we can try again.

Since the baby boomers are now mostly retiring I think there is a change coming but is it 2-3 years away or still another 10 years I have no idea.

I would assume a 5% term deposit will equal a 7% mortgage rate again ( just like I was paying on my first house in year 2000) . I keep hearing a 1% in cash rate = 10% drop in housing market so let's see if that turns out to be true.

 

Well, if a bank is willing to pay 4% for a 5y term deposit (not too far from the 4.7% fixed rate loan offered by CBA 5y)

 

Unusual name that Judo Bank. I assume if you're not happy with the service you can give a staff member the ol' hip throw lol

 

I saw Anz offering 3y/5y structured debt at 4.2+,
This was offered at 0.6% just 12 months back, not sure if its indicative of whats to come but point is we are starting to see offers from mainstream institutions as well.
Bond market via its projected rates is telling this is what we will accept if RBA is not buying whats its printing and we have to buy.
Banks will need to tap open market for funding its loan book in absence of cheap money via RBA TFF,/QE if this is so its just a matter of time MR will be decided by market rather then RBAs cash rate.

 

Does it mean it will take 5 yrs for rates to be 4.05%? That's a pretty slow increase.

 

no its not. remember its AVERAGE you are looking at on those. what you need to do is convert/think in forward starting rate terms

simple example
1y at 2.7%
2y at 3.5%

it doesnt mean in 2y cash rate is 3.5%. mathmatically it means average over 2y is 3.5pct
but hang on, if first year is 2.7pct, then what is
1y rate that starts in 1y that can average to 3.5pct over 2y?

answer: 4.3pct, 1y term deposit starting May 2023

 

As an ADI Term Deposit product, the risk is virtually zero because it's covered by the Government's Financial Claims Scheme up to $250,000 per ADI per account holder.

 

Different banks have different funding structures. One might ask why they need to source funds so expensively when no one else needs to.

 

rate hikes cycle just commenced. I would not lock my money away on term deposits. only when cycle turns it may be wise to yield-grab by locking longer term deposits.

 

I'd say it's early days. The others haven't really updated theirs yet.

Macquarie Bank now offering 3.35% p.a. 3yrs / 3.50% p.a. 5 yrs.

Wait for the other banks to update. . .

 

When banks are voluntarily returning the 188bio of free money taken form RBA as term funding facility (TFF) due to public pressure ahead of the deadline, then competition for deposits will get fierce. in high rates environment I doubt the banks want to use debt instruments, and consumer deposit should drop back from record high as pent up demand spending takes hold and they repay their debts.

My friendly advise is don't lock any rates in just yet. keep it as call deposit.

if you have curiosity RBA has good summary
An Assessment of the Term Funding Facility | Bulletin – September Quarter 2021.

 

AMP this month came with a TD of [email protected]%, [email protected]%

These TDs are backed by Australian Government Guarantee for upto 250k/adi,
that make its no less safe then a TD with ANZ or comm-sec.

If RBA is serious about putting breaks on QE,
or even worse follow FEDs lead and start QT,
then I would say this is just the start... TD rates will get hotter.

 

Looks attractive.
AMP TD

 

I think they might be trying to lock in some funding at a "cheaper cost" now, than, say, 12 months from now!!!

The banks might know something we vaguely know, ha!

Interesting times ahead.

 

Cheers, I'm also waiting for the 2nd Tax Bracket to be abolished in 2024!

 

As if that 2nd tax bracket will be removed once labour gets in and needs the funds.

 

AMP today Increased their 5Y Term-Deposit rate to 4.15%