Cash in on rates
WHERE TO FIND THE BEST TERM DEPOSITS
Stashing cash in a term deposit with an interest rate around 4 per cent may seem secure and attractive in today’s uncertain financial environment, but savers are being urged to ask some questions first.
The best term deposit rates right now are almost 5 per cent, according to research group Canstar, but this means locking your money away for four or five years.
Finance specialists say term deposits have their place, but consumers should also consider other investment options, spread their savings, ask themselves what the money will be used for and question whether their cash is in the best bank.
SAVINGS LOTTERY
Canstar group executive financial services Steve Mickenbecker says term deposit rates climbed before home loan rates started rising in
May, and some may not have much further to go.
“It’s a bit of a lottery as to whether you should lock into long-term rates or not,” Mickenbecker says.
“There’s nothing like the remorse when you have found you have locked into a rate and then the rates go up – it’s not a nice feeling.”
He says savers should have a good look at available deposit rates, “think about staggering your maturities”, and avoid signing up to automatic renewals because rates are constantly changing.
“I think term deposit rates could still move further up, certainly at the shorter end of one and two-year term deposits,” he says.
“But for five years, maybe that’s done as much as it will for a while.”
Savers should not feel wedded to standard terms such as one or two years, Mickenbecker says, because there are often good rates available for “odd numbers” such as 11 or 13 months.
BIG NOT ALWAYS BEST
“Remember that you can go to a provider that’s not one of the major banks,” he says.
“The government guarantee is there for approved deposit-taking for terms above 24 months, and unlikely, if not impossible, to find Ratecity.com.au research director term deposits offering rates that will Sally Tindall says this is a clear sign it keep up with inflation,” Frinsdorf wants more deposits. says. “When savings don’t grow at the
“At 4 per cent, CBA’S highest term same rate as inflation, Australians deposit is now over 13 times what it effectively lose money through lost was before the RBA hikes began in buying power.
May,” Tindall says. “The best and strongest returns on
“CBA’S super-sized term deposit wealth are made through acquiring hikes will likely force other long-term assets in a low banks to significantly boost market. For example, savers their rates if they want to who currently hold remain competitive. significant cash with a
“If you’re going to long-term view on lock up your money investing should in a term deposit, consider purchasing institutions for deposits up to make sure you get a shares and property $250,000. You don’t have to worry competitive deal. The as investment vehicles about the prospect of the bank cash rate is still on the e that will recover when going broke.”
The best term deposit rates at thef the deposit rise, so your rate should term the Frinsdorf market rises.” says term moment are from Judo Bank, reflect this.” deposits are a valuable tool Firstmac, Macquarie Bank and when people do not want to take People’s Choice. For example, Judo risks or may need the money in the Bank has a 12-month term deposit near future. rate of 4.1 per cent, while 12-month “For example, cash savings needed rates range between 2 and 3.35 per in the next one to two years would be cent at the major banks. better placed in a savings product,
The Commonwealth Bank such as a term deposit or high recently unveiled term deposit rates interest savings account, than stocks of up to 3.95 per cent and 4 per cent or bonds,” he says.
INVESTMENT ALTERNATIVES
William Buck Wealth Advisory director Adrian Frinsdorf says term deposits are not always a good strategy and there are better ways to make money in the current environment.
“In the current market it is highly