2nd Nov 2016
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Big banks secretly reduce term deposit ‘bonus’ rates
savings rates for term deposits

The charm offensive of the big banks is over, with the much-trumpeted August increase in term deposit rates now reversed.

The Big Four banks justified failing to pass on the full August Reserve Bank rate cut to mortgage holders, as a move to balance the needs of savers and borrowers. And when they followed through with a surprising increase in term deposit rates – just before their big bosses faced a Parliamentary Standing Committee on Economics – many thought they were indeed being the good guys.

However, just two months on, finding an attractive interest rate on a one-year term deposit is nigh on impossible, with figures released by Mozo showing that the rates have been quietly and systematically reduced.

The Commonwealth Bank was first to move, reducing its rate for a one-year term deposit by up to 0.65 per cent in September. Westpac has reduced its one-year rate by 50 basis points to 2.5 per cent. NAB has moved on its eight-month term deposit interest rate, lowering it by 0.5 per cent to 2.4 per cent. And while ANZ also dropped the rate on its one-year deposit to 2.55 per cent, it did increase the rates on its products with terms of less than one year.

While term deposits for two and three years are still paying higher rates, these aren’t popular with borrowers who are reluctant to lock away their cash.

According to Mozo spokeswoman, Kirsty Lamont, the increase in rates appears to be have been little more than a PR exercise. "The August term deposit rate hikes were a bit of a PR exercise, designed to take some of the heat off the Big Four for not passing through the full rate cut to home loan customers," Ms Lamont said. 

As well as diminished returns on savings, those who rely on an Age Pension to supplement income are hit twice by such rate reductions. Centrelink applies often-higher deeming rates that ultimately reduce their Age Pension payment.

There is better news for those who are willing to bypass the Big Four banks, especially those willing to save with online institutions. Citibank is offering 3.2 per cent on a six-month term deposit and ME Bank 3.1 per cent over the same term. For those happy to lock their cask away for a year, ME Bank has a three per cent rate, with Bankwest and Rabo both offering 2.7 per cent.

What do you think? Are the Big Four banks simply taking us for fools? Should the Government review deeming rates as often as the banks review their deposit rates?

Read more at TheAge.com.au 

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    COMMENTS

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    4b2
    2nd Nov 2016
    10:14am
    Bring on the Royal Commission into the financial industry as fast as possible.
    Old Geezer
    2nd Nov 2016
    10:36am
    Rubbish all a Royal Commission will do is make some silks rich.
    MICK
    2nd Nov 2016
    11:25am
    I agree with you 4b2. The banks look like they put on a show of accountability for the cameras and now that the annual show is over it's business as usual.
    Whilst a Royal Commission is going to cost what ever government is in power should implement any findings. This does not happen and clear that big business has its contacts which prevent regulation.
    We need a RC and we probably need another election as this government is as I have maintained for a long time OWNED BY BIG BUSINESS. The wash of this is that they will never act fairly and responsibly unless regulated.
    libsareliars
    2nd Nov 2016
    1:24pm
    I agree with 4b2 and Mick
    Crazy Horse
    2nd Nov 2016
    4:11pm
    I agree with 42b and Mick. Only the coercive powers of a Royal Commission can expose what is really going on with the banks.
    Eddy
    2nd Nov 2016
    8:24pm
    Okay OG, yes some silks may get richer from a RC but that would only be a drop in the ocean compared to how richer the big banks, and their executive teams, would get if we don't have a RC. Presumably you have shares in banking so don't want the gravy train derailed.
    Rae
    3rd Nov 2016
    7:59am
    Eddy anyone with a portion of their super in the ASX will be holding a fair proportion of bank stock.Only those who actively choose stocks or do not hold shares won't and that approach is fairly self defeating.

    Those most at risk however are the people too afraid to do anything but keep term deposits or "fixed interest" ie bonds.

    That exposure to debt markets would wipe them out if the banks go down.

    We need strong banks even if some greedy sods make off with too much of the profits. That is a problem the shareholders should be dealing with.
    Old Geezer
    2nd Nov 2016
    10:37am
    Term deposits are even investing as they rarely make any money after inflation and taxes. Invest else where for better returns.
    MICK
    2nd Nov 2016
    11:26am
    Agree with that.....and then you increase the level of risk.
    Old Geezer
    2nd Nov 2016
    11:28am
    No term deposits have a lot more risk.
    MICK
    2nd Nov 2016
    1:09pm
    I was thinking of the share market where you can still get a decent rate of return.
    HarrysOpinion
    2nd Nov 2016
    1:46pm
    invest in residential brick and mortar strata units in popular regional cities and rent it out for 7.3% gross return and net 5% pa. plus asset value growth over a 10 year cycle. (Keep away from holiday units and caravan park investments).

    Whether it's Royal Commission, Judicial Commission, Parliamentary Commission or whatever bull-crap commission something has to be legislated (without loop-holes) to keep the banks, its contracted financial advisers and brokers under strict control and under the consequences of criminal prosecution for unconscionable commercial conduct.
    Old Geezer
    2nd Nov 2016
    4:06pm
    Until the strata run out of money because someone gets control and uses the money for their own benefit.
    HarrysOpinion
    2nd Nov 2016
    4:28pm
    Have you read up on the new Strata Laws? Do so !
    Old Geezer
    2nd Nov 2016
    8:46pm
    I am speaking from experience with strata titled units and I never want to involved in them ever again.
    dougie
    2nd Nov 2016
    10:46am
    The banks do not want to lose your money as they will have to pay much more to borrow on the Money Market.
    Just tell them taht you are closing your account as you can much more at another bank. I did and my rate jumped by a considerable amount. Certainly to a rate that is indicative of the probable earning rate. Do not let them bully you - you be the strong one and win !
    Old Geezer
    2nd Nov 2016
    10:52am
    Banks can borrow money at rates much lower on the money market. I'd be watching carefully as when it comes due they will cut your rate back a lot. You need to know what you can get elsewhere.
    Taragosun
    2nd Nov 2016
    11:40am
    I go to the Banks with which I have Term Deposits armed with a list of the current term deposit rates from various institutions. ALWAYS get a much higher rate than what is being offered out to the general public. It only takes 10 minutes and always ask to see someone and sit down with them and ask what is the best they can offer. They have "special" rates in their systems and this is what is usually offered. Have been doing this now for years and years.
    Old Geezer
    2nd Nov 2016
    12:01pm
    Some of the at call accounts offer higher interest rates than term deposits at present too.

    If you take out a preferred banking package then you will also get higher rates on term deposits. Last time I looked tit was about 0.5% higher.
    Sundays
    2nd Nov 2016
    1:10pm
    Thre is always a discretionary amount that banks can apply for long term customers, but you have to ask. I have a savings account, not term deposit and every 3 months the bank will give me an extra 1.7% when I phone and ask them. I used to ask the branch, but was refused once, so now just do it by phone
    MICK
    2nd Nov 2016
    1:11pm
    The online savings accounts seem to pay the best. If you have an automatic top up every month then there is a bit more on the top of that as well. Still paltry when compared to the share market and also inflation is starting to move and is gobbling away your capital on top of that. This is something investors rarely think about.
    Old Geezer
    2nd Nov 2016
    3:53pm
    Sundays I used to do the same but the last time I had to open another account instead as they are no longing allowing it. Seems a bit stupid to me. That bank also has another savings account that pays a higher interest than term deposits. You only have to deposit a dollar a month and make no withdrawals.
    Tedwalker
    2nd Nov 2016
    11:06am
    Lot's of people will stay with term deposits because they feel the current share and property markets are too unstable, and may be riding for a fall.
    It's a bit of a Catch22.
    Old Geezer
    2nd Nov 2016
    11:25am
    Does it really matter day to day what your shares and property are worth as long as they make a good income? No it only matters if you wish to sell. If you don't then why concern yourself with the day to day volatility of these markets.
    Rae
    2nd Nov 2016
    4:05pm
    Falls are great buying opportunities. If it does happen the last thing you'd want is your cash locked up in a term deposit and the share market on sale.
    Old Geezer
    2nd Nov 2016
    4:19pm
    I agree Rae. I will be looking for bargains when the share market comes on sale again.
    Rae
    3rd Nov 2016
    8:08am
    Could be as early as next week OG. That fall yesterday and rise in the gold price on the FBI news was informative. If Trump gets over the line it could be very volatile for a while.

    I certainly am happy I'm not locked into term deposits.

    I have one of those pay into and don't withdraw accounts which pays 4.3%. More than I can get on a term deposit with my bank.

    If I want the money I just forego that months interest.

    I stopped using term deposits back when it became hard to get at the money.

    I have my doubts about the solvency of the banks with all the debt from the great debt binge hanging over them.
    Anonymous
    7th Nov 2016
    9:28pm
    But many retirees are being FORCED to sell to compensate for lost pension income. Denied a choice, they will lose money and ultimately be denied the comfortable retirement they worked for and earned, and end up poor. But according to OG, that's okay. While some retirees earn over $70,000 a year (for a couple) indexed to inflation and without any endeavour (Comsuper pensions, etc) and still get an aged pension, battlers who haven't nearly enough to provide for the retirement they planned and worked hard for are being persecuted, and mongrels justify it with lies claiming $800,000 in assets, earning maybe a miserable $20-25K a year, makes someone a ''millionaire'' who can be self-supporting.

    2nd Nov 2016
    11:45am
    "now reversed"??? Term deposit interest rates have been going down for AT LEAST the last 18 months!!
    Waiting to retire at 70
    2nd Nov 2016
    12:03pm
    How do you define scum in 5 letters?

    BANKS

    What is bovine excrement?

    TurnBULL sh*t
    Old Geezer
    2nd Nov 2016
    12:17pm
    I love the banks as they fund my retirement income very well.
    MICK
    2nd Nov 2016
    1:15pm
    Shares IN THE BANKS which have been held for some 5 years are doing well. You'd better hope that the global debt bubble does not crash though as people who have mortgages will walk away and investors in banks will bleed zero dividends.
    Old Geezer
    2nd Nov 2016
    3:49pm
    Not a worry to me.
    Rosret
    2nd Nov 2016
    12:10pm
    It hurts us. The CPI doesn't include any items that are out of control - like real estate, rates, electricity to name a few and the banks can't offer to keep our savings even at the rate of inflation let alone as an investment.
    MICK
    2nd Nov 2016
    1:17pm
    The CPI is a fabricated figure methinks. They say we have zilch inflation but anyone buying groceries or other consumables can tell you otherwise. And when oil goes back to its previous price the oil companies will jack up fuel prices to double what they were when oil reached its highs before.
    The CPI is massaged and about as believable as the figures coming out of China.
    Old Geezer
    2nd Nov 2016
    4:08pm
    It will be a long time before oil gets back to those high levels as when it gets to $55 then many producers will ramp up production as they can make money at those levels.

    I haven't noticed prices increasing for quite some time. Still spend same amount each week on groceries.
    two cents worth
    2nd Nov 2016
    12:56pm
    The banks are a business and like any other business I guess that they are there to make a profit and to balance loans against deposits. Its lousy that deposit rates are so low and hard to believe that they can access money externally for rates less than they are currently willing to pay us.

    My big concerns are the fact that we have to take a minimum 4% from super (if <65) and also the fact that Centrelink has a 'deemed' rate of return.

    The Government needs to review the minimum withdrawal amount. You should not have to take more than your super earns ... assuming that it may be earning less than the 4% after fees etc.

    Centrelink needs to review the deeming rate and have a rate that reflects current term deposit rates ....

    In relation to Transition to Retirement Pensions (TRIS) .... changes to legislation relating to this are absolutely retrospective ... regardless of what Mr Turnbull says. It is true that many people used this as a way of topping up super, while maintaining full time employment and having a tax free status on their pension account.

    Unfortunately, some did actually use this as it was intended, and receiving tax free only one of my concernsMy 'two cents worth' only

    from cheaper
    Old Geezer
    2nd Nov 2016
    1:03pm
    The 4% you have to take from super is determined by your age and life expectancy. It has nothing to do with your rate of return. That is because super is meant to be spent over the rest of your life with no capital left when you die. It is simply stupid to deprive yourself of money just to pass it on to the next generation.

    It is also a good idea for the deeming rates to be above the term deposit rates because it is simply stupid having your money in a investment that goes backwards nearly every year due to inflation and taxes.
    MICK
    2nd Nov 2016
    1:19pm
    The banks may be a business but their CEOs are paying themselves and their Boards like kings WITH SHAREHOLDER MONEY. Very few of them are worth what THEY are taking from shareholders.
    Old Geezer
    2nd Nov 2016
    4:09pm
    Good luck to them Mick as I certainly wouldn't want their job.
    Rae
    2nd Nov 2016
    4:19pm
    Nothing stopping you from taking the 4% and saving and investing excess outside super. You can earn around $58000 as a couple without tax being paid but even so if you pay tax you are making a bundle.

    If really concerned diversify into bullion which can be sold off in small amounts in just about any town big enough to have a pawn shop, jeweller or antique dealer , transferred readily and holds its own against inflation.
    Old Geezer
    2nd Nov 2016
    4:51pm
    As long as it's rare gold not polished stuff as that already has a high premium added.
    two cents worth
    2nd Nov 2016
    1:08pm
    ... sorry, new to this and appears that I was booted off and my last sentence scrambled!

    Continuing with where I left off .... Unfortunately, some did actually use this as it was intended and reduced their working days as a transition to retirement. I was one of these and I reduced my employment from full-time to part-time with the same employer. This was a changed position and I am unable to get these days back. This certainly reeks of retrospective to me. I am also financially disadvantagd by this as I now have to stop the TRIS due to the changed tax status of the fund.

    My 'two cents worth'.
    Old Geezer
    2nd Nov 2016
    3:56pm
    With the change in position you may have triggered a release of your super. If so you can be on a pension not a transition to retirement pension. Check with your financial advisor.
    jake
    2nd Nov 2016
    1:11pm
    I notice ANZ has again reduced interest rates on savings accounts. Rates are better at NAB and Heritage. Seems that ANZ are intent on making their customers pay for their managerial shortcomings.
    two cents worth
    2nd Nov 2016
    1:47pm
    Who said anything about passing it on to the next generation old geezer.

    I am aware of the minimum/maximum drawdowns in relation to age and I didn't say anything re deeming rates having anything to do with rate of return. I did say that perhaps this should be a consideration.

    The 4% should be able to be reduced .... and rate of return should be a consideration. If you have a low return or you want to work casually to prop up income so that you are not reliant on a Government age pension any earlier than needed, surely that is a good thing?
    Old Geezer
    2nd Nov 2016
    4:00pm
    No it is not a good thing because the percentage you have to take out is the minimum that is in relation to your age. The idea of super is to draw down enough each year so that you have nothing left when you die.
    Rae
    3rd Nov 2016
    8:24am
    Check out the income tax for your age.

    You can earn just on $32000 as a single or $58 000 as a couple without paying tax outside of super.

    Once retired you do not pay tax at the same rates as now while working. It makes a huge difference and financial advisors never mention this.

    So it is easy now to cope with low returns or casual work and pay no tax.

    If rates of return ever rise to the level of needing to pay tax on the outside super investments then be very very grateful indeed.

    The years I pay tax are very good years.
    ozrog
    2nd Nov 2016
    9:57pm
    Yep what would expect from crooks.
    Not Senile Yet!
    2nd Nov 2016
    10:05pm
    Time to Order the Banks to COMPLY or face a Royal Commision......Prime Minister?
    Oh...hang on ....he is just a Puppet isn't he?
    Okay....Time for a Royal Commission into Banking Corruption & Collusion......Right Wing corrupted Caucus of the Liberal Party!!!
    PlanB
    3rd Nov 2016
    8:30am
    Have not read the other posts but I say bring on the Royal Commission -- and get these bastards out in the open --

    The amount they charge for loans is OTT but the amount they give on interest is pathetic!
    baron
    4th Nov 2016
    10:05am
    Get 3.5% in term deposit's, invest in NZ 5% exchange rate 3% term deposits
    PlanB
    5th Nov 2016
    7:10am
    You have to tie your money up with a Term Deposit --- and for how long for 3.5% ?
    Old Geezer
    7th Nov 2016
    7:44pm
    I had to go over to NZ to open my NZ account so I could invest in NZ. It's done well for me.
    PIXAPD
    7th Nov 2016
    9:22am
    Bank earnings is NOTHING, but Super earnings is good, and anyone retiring should keep their Super and take a Retirement Income Stream, even though the Market is up and down, over the long term (10) years performance is good. Draw down a modest amount each fortnight to supplement the aged pension and you'll be fine
    PlanB
    7th Nov 2016
    10:18am
    I never had super
    ex PS
    7th Nov 2016
    2:38pm
    PIXAPD, is on the money, my Super investment plan which provides a pension, has not returned under 6% in the last four years. You just need to select the right investment strategy within the plan for your needs.
    Old Geezer
    7th Nov 2016
    7:43pm
    I agree bank earning is not an investment as it rarely makes a profit after inflation and taxes. I call it lazy investing where the banks make the big profits that should belong to the person owing the money.


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