Banks 'are competing for term deposits'

The major Australian banks are offering good interest rates on term deposits as they compete for their customers’ savings, a commentator has observed.

Writing for the Business Spectator, columnist Stephen Bartholomeusz noted that as offshore debt markets shut down during the global financial crisis, the banks were forced to find alternative sources of funding and offered attractive term deposit rates as a result.

"With the cost of term deposits having also risen sharply as the banks … compete for them to reduce their reliance on offshore funding, average funding costs have risen and will continue to rise," added Mr Bartholomeusz.

However, he noted that while higher interest rates are advantageous for people who choose to compare term deposits, other bank customers could face more debt pain because of rising rates on home loans and credit cards.

Annette Sampson from the Sydney Morning Herald, recently noted that Aussies willing to lock their money away for a year could get interest rates as high as 6.5 per cent at MECU and Bank of Cyprus, or seven per cent for a three-year term.

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