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?
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