News that the Reserve Bank of Australia (RBA) has cut the cash rate to a record low of two per cent may have mortgage holders smiling, but the news is much less palatable for savers.
Those who rely on the income from term deposits and interest-bearing accounts will no doubt have received the news of the RBA rate cut with a heavy heart. With banks reducing the rate of return on savings of their own volition, the real issue is further compounded by a reduction in the cash rate.
The rate cut, which is hoped will stimulate business investment, confidence and consumer spending, may also fan already hot property markets in Melbourne and Sydney. This is not good news for those trying to buy or upgrade their property.
Term deposits currently only pay around 2.25–2.5 per cent, although in some instances you can get three per cent; these rates could drop further. And with current deeming rates at 3.25 per cent for balances over $48,000 for singles, there may soon be a greater imbalance.
Let’s hope that the next move we see is a lowering of the deeming rate by the government.
Have you seen your return on savings dwindle? Does the deeming rate accurately reflect your return?