Get interested in deposits
Sydney Morning Herald
Wednesday January 13, 2010
Banks want as much of your cash for as long as possible €” but shop around for the best rates of return. A trend in the retail banking market is for deposit-taking institutions to hold back on passing some of the recent interest-rate increases through to customers with at-call high-yield online accounts and promote higher rates on bonus saver accounts, term deposits and other products that are more effective at locking deposits in.All financial institutions want to increase their level of funding from retail deposits and they are competing with attractive rates. But they are also keen to make sure they hold on to those deposits for as long as possible. Savers looking for the best deals have to balance the convenience of having their money at call against the higher rates available for locking their money in.A significant number of institutions did not move their online savings account rates by the full 0.75 of a percentage point to match the change in the official cash rate between October and December last year. Of the 53 banks, credit unions and building societies in the InfoChoice database offering high-yield online savings accounts, only 10 passed on all three 25 basis point official cash rate increases, 40 passed on some of the increase and three have not changed their rates.The interest-rate leader, UBank, is offering 5.51 per cent on its USaver online savings account. However, UBank moved the USaver rate up by only 0.05 of a point in December and a total of 0.4 of a point since October. At the same time it is offering 6.06 per cent for a six-month term deposit and 6.31 per cent for a 12-month term deposit.ANZ has increased the rate on its Online Saver account by a total of only 0.5 of a point since October but is being more generous with its Progress Saver account. It put the rate on Progress Saver up by 0.35 of a per cent in November and again by 0.35 of a point in December. Progress Saver pays a base rate of 0.01 per cent and a bonus rate of up to 3.7 per cent in any month when a minimum of $10 is deposited and there are no withdrawals. ANZ increased its term deposit rates by as much as 0.75 of a point in December.HSBC is offering 2.75 per cent on its Online Savings account and 4 per cent on its Serious Saver account. The interest on Serious Saver is payable in any month the customer does not make a withdrawal. On December 21, HSBC launched a special offer, paying 5 per cent on Online Savings accounts with balances over $5000 and 5.5 per cent on Serious Saver. Both offers run until March 15.Westpac is also in the market with a special offer. It is paying 5.25 per cent on its eSaver account and 5.45 per cent on its Reward Saver account. These rates are available for four months after opening a new account. To qualify for the Reward Saver rate, customers must deposit a minimum of $50 a month and make no withdrawals.Financial institutions are also being aggressive with their term-deposit rates.Savers can get 5.5 per cent for 90 days from Bank of Queensland, Credit Union Australia, Heritage Building Society, Macquarie Bank and Rural Bank. And they can get 6.25 per cent for six months from Bank of Queensland and Rural Bank, and 6.15 per cent from Heritage Building Society and Suncorp.For a 12-month term deposit, savers can get 6.65 per cent from Credit Union Australia, 6.5 per cent from mecu, Queensland Teachers Credit Union and Rural Bank, and 6.30 per cent from Bank of Queensland.Savers can expect the competition on deposit rates to continue.KPMG's 2009 financial institutions performance summary says the funding priority that financial institutions established in 2009 - reducing wholesale debt and maintaining or growing share in retail deposits - will remain a high priority in 2010.Interest rate outlookSavers can earn a higher interest rate by putting their money in a six- or 12-month term deposit but they should give some thought to how interest rates are likely to move in the coming year. Here is how the economists at the big four banks see the interest rate outlook.Westpac chief economist Bill Evans is predicting the Reserve Bank will raise interest rates by 0.25 of a per cent in February. The bank is forecasting the official cash rate will rise from its current rate of 3.75 per cent to 4.5 per cent by June and 4.75 per cent early in 2011.ANZ's most recent economic forecast predicts the official cash rate will hit 4.75 per cent by the December quarter.Commonwealth Bank is expecting rates to rise steadily throughout the year and reach 5 per cent by the December quarter.National Australia Bank is the most moderate among the big four in its interest rate forecasts. It is forecasting the official cash rate will be at 4.25 per cent by June.
© 2010 Sydney Morning Herald
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