Savers win big as banks compete for deposits

Competition for deposits among the major banks has meant that interest rates on some savings accounts are already greater than mortgage rates.

The banking rivalry has put savings interest rates as high as seven per cent on three-year term deposits and eight per cent on five-year accounts, the Australian reported.

According to the newspaper, about 40 per cent of the banks’ mortgage funds come from retail deposits and it is expected there will be an increasing reliance on customer savings after the government’s decision to end its wholesale funding guarantee from March 31st.

The development is likely to encourage Aussies to compare savings accounts as a range of banks put up their rates. RBS chief economist Kieran Davies told the Australian: "Some banks are offering deposit rates that exceed the standard variable mortgage rate. The last time this happened was in the mid-1980s, but there was a ceiling on mortgage rates back then."

Kevin Benger, chief executive of credit union Community CPS Australia, recently told that many savings account interest rates are also over and above the Reserve Bank of Australia cash rate.

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