Nick Bruining: Shop around if you’re chasing high interest rates on bank term deposits

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Nick Bruining: Shop around if you’re chasing high interest rates on bank term deposits

Investors chasing high interest rates on bank term deposits have been urged to shop around, as Australia’s big four slashed term ******** rates last week.

ANZ led the charge, clipping 0.8 per cent a year off some term deposits, followed by National Australia Bank, Commonwealth Bank and Westpac.

The fall comes in spite of the Reserve Bank of Australia holding the official cash rate at 4.35 per cent at its last meeting in early August. Experts expect further falls in ******** rates if the RBA cuts rates in the future.

RateCity research director Sally Tindall said: “While the RBA has poured cold water over the possibility of a rate cut in 2024, it’s also worth remembering the Reserve Bank board is continuing to refuse to rule anything in or out.”

Fierce competition for new business has seen some lenders trimming mortgage rates, which could affect profitability unless they lower the amount paid on deposits.

In simple terms, banks buy money from us as depositors, and sell that same money to our kids as a mortgage.

Lowering ******** rates is one way of keeping the profits up for shareholders. For investors chasing a better rate, the choice is vast.

Ms Tindall said not to fall into the trap of simply ignoring a maturing term ********.

“Diarise the day your term ******** is set to mature and start canvassing your options well in advance of this date,” she said.

Ideally, that would be a about a week in advance, and investors should not think twice about departing from the traditional Big Four banks of NAB, Westpac, ANZ and CBA.

All of the better deals are with the second-tier banks and institutions.

Online bank Rabobank, for example, is offering an introductory rate of 5.75 per cent for the first four months, with all money available at call.

You can set up the account from home using your computer, protected by an elaborate security regime. These saving accounts are not term deposits — the rate could change any time.

“Investors should also remember that a ******** with any *********** registered authorised ********-taking institution (ADI) has the same government security as a ******** with the big banks. Don’t get sucked into paying what amounts to, a loyalty tax,” Ms Tindall said.

The Financial Claims Scheme is a Federal Government scheme that guarantees up to $250,000 per account holder per institution.

That includes credit unions, building societies and online banks such as Rabobank, ING Direct and others.

One word of caution — that limit applies to the overall organisation. CBA and Bankwest, for example, are regarded as the same ADI for guarantee purposes.

Also, be prepared to accept different maturity durations, because the differences are startling.

“Don’t just jam a square peg into a round *****. Instead, check whether there’s a better fit with a differing maturity date or at an alternative bank,” Ms Tindall said.

NAB’s six-month term ******** pays 3.6 per cent a year, and its nine-month one pays 4 per cent. But select the eight-month option and it will pay you 4.8 per cent.

Once again, however, the real stars are the online banks with minimal branch infrastructure to support

Rabobank is still offering 5.75 per cent a year to new customers for the first four months up to $250,000. Once the fou- month bonus ******* ends, it reverts back to the “normal” crediting rate of 4.4 per cent a year.

Nick Bruining is an independent financial adviser and a member of the

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