Banks will continue to push term deposits, says Guy Debelle
Assistant governor at the Reserve Bank of Australia (RBA) Guy Debelle believes that banks across the country will continue to encourage customers to take on term deposits.
A lot of Aussies have been trying to adjust their spending habits in recent years, as the global economic downturn left plenty of people in a mess.
There has been much greater emphasis on savings accounts since 2008-09 and households have been far more careful with their money.
Although it is encouraging to see more people putting money aside for a rainy day, it appears that many Aussies are struggling to maximise the potential of their cash reserves.
Savings accounts are obviously good to have, but those who want to see better returns should also look into term deposits.
These packages generally come with far more attractive interest rates and this trend is likely to grow in the near future.
Speaking to the Herald Sun, Mr Debelle suggested that some banks are cutting the rates attached to their standard savings accounts in the hope that it will force more customers to switch to deposits.
New Basel III laws are set to be introduced in 2015 and these are aimed at improving banks' balance sheets.
However, experts predict the reforms will cause a credit squeeze and the competition between banks looking to secure deposits will become incredibly intense.
"As banks focus on the… costs of such products, I would expect to see these rates decline," Mr Debelle told the news provider.
"Indeed, it would be surprising if the 'repricing' doesn't occur fairly soon."
A number of lenders have essentially been putting their term deposits in the shop window in the past six months by going against guidelines set by the RBA.
While the RBA trimmed the national cash rate to 3.5 per cent in June, some banks chose to either keep the rates attached to their deposits the same or raise them slightly.
With some economists predicting further rate cuts by the end of the year, it will be interesting to see what impact the changes have on deposit rates.
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