Put squeeze on banks for best rate on savings

BANKS are giving savers dismal returns as low as 1.5 per cent for locking away their money in fixed-term deposits.

But for those customers who are prepared to do the legwork, some financial institutions are offering interest rate deals double this.

Latest analysis by financial comparison website RateCity shows savers with $10,000 at hand can pocket $300 per year on 12-month term deposit accounts at Teachers Mutual Bank and its offshoot Unibank, which have been paying customers a rate of 3 per cent since

July.

Those with fatter savings of

$50,000 have more choice, with financial institutions including CUA, Greater Bank, ING and The Mutual all offering interest rates at

3 per cent.

But RateCity spokeswoman Sally Tindall warned locking away your cash for fixed periods needed to be thought through carefully. “Work out whether a term deposit is right for you and your investment strategy,’’ she said.

“If you are planning on locking up your money and you want to set and forget it can be a good way to protect your savings.

“But it’s worth keeping an emergency fund on the side just in case you need some cash quickly.”

Reserve Bank of Australia figures show in July 2008 the average interest rate on a $10,000 12-month term deposit was 8.25 per cent. This compares to 2.2 per cent now.

The inflation rate is just 2.1 per cent so the average term deposit is tracking 0.1 per cent above inflation, making it difficult for savers to reap decent returns.

Teachers Mutual Bank’s chief executive officer Steve James said the most popular term deposit was 12 months and most customers were locking away $10,000.

“Customers need to do their research and look out for somewhere around the 3 per cent mark,’’ he said.

“Generally you receive a notice from your financial institution when your term deposit is maturing and that generally comes out before it matures and that’s when they should start looking around.”

Financial institutions do charge an administration fee if money is withdrawn from a term deposit prematurely. This usually requires 31 days’ notice.

The Reserve Bank of Australia has kept the cash rate at the historically-low level of 1.5 per cent since August 2016. But only last week, RBA Governor Philip Lowe warned that the next cash rate move was likely to be up.