Smaller lenders woo savers with better rates
Australian savers suffering from low term deposit rates from the big four banks would do well to consider small lenders offering more attractive rates.
Mentioned: ANZ Group Holdings Ltd (ANZ), National Australia Bank Ltd (NAB), Westpac Banking Corp (WBC)
Australian savers suffering from low term deposit rates from the big four banks would do well to consider small lenders offering more attractive rates.
Several of these are offering much higher interest rates on six-month term deposits, according to comparison site RateCity.
"For borrowers who want to put $5000 into a six-month term deposit with a big four bank, ANZ is paying the highest interest rate, at 2.10 per cent," RateCity's Nick Bendel says.
"Commonwealth Bank, NAB and Westpac are all paying 2.05 per cent interest for $5,000 six-month term deposits."
For six-month term deposits, smaller lenders, rather than the big banks, are offering some of the highest interest rates in Australia.
Bank of Sydney is paying investors 2.85 per cent interest for putting $5000 into a six-month term deposits, while Bank Australia is paying 2.80 per cent.
UBank, ME Bank and Firstmac are paying 2.75 per cent for $5000 six-month term deposits, while UniBank and Teachers Mutual Bank are paying 2.70 per cent.
The RBA meets today where it is widely expected to keep rates on hold at 1.5 per cent. It has left the cash rate unchanged since August 2016.
Source: RateCity
In a move anticpated by Morningstar's David Ellis, Westpac (ASX: WBC) became the first of the big four to stage an out-of-cycle rate hike. At 68 per cent, Westpac has the highest home loans exposure among its peers.
The bank blamed funding costs for its decision to increase its variable mortgage rate by 14 basis points.
Meanwhile, term deposit rates have offered little to savers over the past year. The average rate for a 12-month deposit has hardly moved, The Australian reports, using data from comparison RateCity.
The average term deposit rate in July was about 2.2 per cent — barely above inflation at 2.1 per cent.
A decade ago, the average term deposit rate was 8.25 per cent. Inflation was at 4.4 per cent and the cash rate was at 7.25 per cent, according to Reserve Bank data quoted by the paper.
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Lex Hall is a Morningstar content editor, based in Sydney.
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