How high could savings and term deposit rates go in 2023?

When interest rates are on the rise, there is one group of Australians who tend to come out on top: the savers. 

At the May board meeting today, the Reserve Bank of Australia hiked the cash rate by 25 basis points to 3.85%.

After a years’ worth of interest rate hikes, you may be wondering just how high savings account and term deposit interest rates could climb in 2023?

Big four bank’s cash rate forecasts:

• CBA: Peak of 3.85% by May 2023, then dropping to 2.85% by May 2024
• Westpac: Peak of 3.60% by March 2023, then dropping to 2.35% by May 2025
• NAB: Peak of 3.60% by March 2023, then dropping to 3.10% by May 2024
• ANZ: Peak of 3.85% by August 2023, then dropping to 3.60% by November 2024

According to the big four banks, the cash rate may have officially peaked at its new high of 3.85%. If these predictions are accurate, the cash rate could remain at 3.85% for some time, before potentially being cut at the end of 2023 or start of 2024. 

If all providers pass on this latest cash rate hike in full, this would mean that interest rates on savings and term deposit products could climb by another 25 basis points. 

Currently, the most competitive 3-year term deposit interest rate on the RateCity database (for a $25,000 deposit) is 4.90% from Judo Bank. For savings accounts, this is also 5.00% from ING and MOVE Bank. 

If this latest rate hike is passed on in full to savers, term deposit interest rates could reach 5.15%, and savings account rates could reach 5.25%.

How high could savings account interest rates climb?

At the time of writing, these are the highest ongoing interest rates for all adults for savings accounts on the RateCity database.

Source: RateCity.com.au. Data accurate as of 01/05/2023. Based on highest ongoing rates on products for all adults. Hypothetical rate hike predictions based on cash rate peak at 3.85% in 2023 and all providers passing on cash rate hikes in full. 

If all Australian providers passed on these hikes in full to savings customers, many interest rates on savings accounts could start with a ‘5’ again.

In terms of cash in your pocket, if you deposited $25,000 into a savings account with an interest rate of 5.25%, and you didn’t make any extra deposits, after 12 months you would earn an extra $1,279 in interest.

Keep in mind that these figures are based on forecasting by the big four banks and hypothetical calculations, which are subject to change. Savers will still need to meet any conditions and eligibility requirements to earn the highest rates.

How high could term deposit interest rates climb?

At the time of writing, these are the highest ongoing interest rates for all adults for savings accounts on the RateCity database. 

Highest deposit rates on a $25k deposit

1-year term deposits

2-year term deposits

3-year term deposits

Source: RateCity.com.au. Data accurate as of 01/05/2023. Hypothetical rate hike predictions based on cash rate peak at 3.85% in 2023.

If all Australian providers passed on the latest cash rate hike in full, interest rates on some of these accounts could reach 5.15%.

In terms of cash in your pocket, if you deposited $25,000 into a 1-year term deposit paying interest yearly, with an interest rate of 5.15%, you would earn an extra $1,288 on your investment. 

Keep in mind that these figures are based on forecasting by the big four banks and hypothetical calculations, which are subject to change. Savers will still need to meet any conditions and eligibility requirements to earn the highest rates.

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