NAB hikes its term deposit rates

The recent sweeping interest rate cuts that have been seen throughout Australia provided some much needed relief for loan customers, but people with savings and term deposits were not so pleased with the news.

Leaders at the Reserve Bank of Australia (RBA) slashed the national cash rate by 50 points in May and followed this up with another 25-point reduction in June.

Although the institution opted not to lower it further at the start of this month, the damage had already been done for many people – or maybe not.

Surprisingly, a number of banks have chosen to ignore the RBA's guidelines and have decided not to reduce their deposit rates.

Competition for deposit holders has become increasingly intense down under and this has forced a lot of companies to offer incentives in order to attract new customers.

National Australia Bank (NAB) is the latest firm to take this approach, as bosses announced that its 12-month deposit rate would go up by 25 basis points to 5.31 per cent, while the rates attached to its three-month products were increased by five points to 5.11 per cent, the Sydney Morning Herald reports.

The bank's online division – UBank – also revealed that rates on its USaver account were going up by ten points.

This is great news for people who have worked hard to set up a sizeable nest egg that will ensure they have a comfortable retirement.

However, a lot of Aussies are still concerned that their savings funds will be adversely affected by the RBA's rate cuts and many economists are predicting the central bank to slash the cash rate even further by the end of 2012.

Amelia Christie – a research policy officer at the Combined Pensioners and Superannuants Association of New South Wales – recently told the Sydney Morning Herald that a lot of older term deposit holders have started to tighten their belts in case the rates attached to their products come down.

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