Why 5 year term deposits often pay less than a 6 month | Mayfair 101

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Investor Education Centre > Bank Products > Why 5 year term deposits often pay less than a 6 month term deposit

Why 5 year term deposits often pay less than a 6 month term deposit

Have you ever wondered why a 5 year term deposit pays less than a 6 month term deposit?  Well, so do many investors.

Surely if you invest for a longer term you would expect to receive a higher term deposit rate?

Unfortunately this is not the case with most term deposit products offered by Australian banks.  Here’s the reason why…

Banks use term deposit money to support their balance sheets, enabling them to undertake financing activities such as home loans, car loans and credit cards.  Given the close relationship between official interest rates set by the Reserve Bank of Australia (RBA) and term deposit rates, banks don’t like to look too far into the future, and as a result are cautious with the rates they provide on longer term deposits. 

As a result, even the best 5 year term deposit rate is often significantly lower than the best 6 month term deposit rate. 

To get around this many investors like to roll over their 6 month term deposit in order to maintain a higher rate, however even this can be a challenge if the rate changes.  For those living off the income generated by their term deposit it isn’t an ideal solution.


IPO Wealth’s view is that long-term investors deserve to be rewarded more than shorter term investors.  Our investment options range from 3-60 months and pay monthly distributions.  We are not a bank and like all investments there are risks, however we have many investors throughout Australia that are delighted with the personalised service they receive and our very competitive target returns.

Mayfair 101 established IPO Wealth to specifically cater for High Net Worth investors seeking income-producing investments.  For more information visit www.ipowealth.com.au


This website contains general information only and is not intended to provide any person with financial advice. It does not take into account any person's (or class of persons) investment objectives, financial situation or particular needs, and should not be used as the basis for making investments.

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