This week in banking - Term deposits continue to drop

Niko Iliakis

Friday 18 January 2019

A number of trends from last year have continued into January, including several changes which gesture towards an upcoming decision by the RBA.

According to our in-house experts, the changes in rates likely reflect a growing belief among the banks that the total price environment will go down. There’s an increasing likelihood that the Reserve Bank is going to cut the cash rate, and banks are responding accordingly.

Term deposits trending down

The past week saw more cuts made to term deposit rates. Greater Bank made some of the biggest changes, slashing its three, four and five year term deposits to 2.75%.

This caught the attention of Mozo’s Product Data Manager, Peter Marshall. “They’re usually a price leader,” he says, “so it’s very interesting to see them making a very definitive move to shift their rates down.”

Several other banks followed suit. Here are the main changes across term deposits:

ProviderWhat's changedPrevious valueNew value
Maitland Mutual Building Society1 year annual rate2.75% p.a.2.60% p.a.
2 years annual rate2.75% p.a.2.60% p.a.
3 years annual rate3.00% p.a.2.75% p.a.
BOQ Specialist3 years annual rate2.60% p.a.2.50% p.a.
4 years annual rate2.65% p.a.2.55% p.a.
5 years annual rate2.75% p.a.2.65% p.a.
ME Bank5 months rate2.65% p.a.2.60% p.a.
9 months rate 2.80% p.a.2.75% p.a.
1 year annual rate2.80% p.a.2.75% p.a.

“The situation will also depend on how economic indicators look,” he says. “If the economy continues to look weak, that supports the idea that the RBA is going to cut, and we’ll see more term deposit rates go down,” said Marshall.

So what does this mean for customers? If you were thinking about locking in a term deposit, you’ll have to do so soon before all the best offers are gone. 

Fixed home loan rates also dropping

Fixed rate home loans are part of the same kind of market as term deposits, so it’s not surprising to see decreases in this category too.

  • BankVic made several cuts to its fixed rates, including reductions of up to 24 bp for owner occupiers and 20 bp for investors.
  • Greater Bank’s Discount Great Rate Home Loan saw reductions ranging from 15 to 25 bp. Meanwhile, rates for its Ultimate Home Loan Package and Discount Ultimate Home Loan Package were changed to 3.94% and 3.74%, respectively.

Variable home loan rates are hiking

We’ve witnessed increasing variable rates over the last six months, including a flurry of activity at the tail end of 2018 when about half of the lenders in our database lifted key variable rates. This past week has been no different:

  • Virgin Money implemented a 20 bp increase for home loans taken out for properties with an LVR of 90-95%.
  • Bank of Australia increased the variable rate for its basic home loan from 3.86% to 3.96%.
  • Bank of Queensland introduced hikes of up to 18 bp across its offerings.

Marshall explains that increases in variable rates are a response to funding cost pressures: “Unless that situation is going to go away and the funding cost pressures ease, I think that we’ll see more banks looking to increase their variable rates."

David Jones Amex cards

On Tuesday, David Jones reduced the Qantas bonus point and ongoing points earning rates of their American Express cards.

  • Both the American Express Card and the American Express Platinum Card now only offer 0.5 points per dollar spent, down from 0.75.
  • The 15,000 bonus points available to new card owners if they shop at David Jones three times within a month of receiving their card has been slashed to 10,000.
  • Similarly, the American Express Platinum card now only offers 20,000 bonus points instead of the previous 30,000.

Police Bank introduces new features for personal loans

And finally, if you're after a personal loan, Police Bank have made some changes to their Debt Consolidation Loan. They now offer $100 cash back on successful applications.

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