Selecting term deposits 'needs to be careful process'

With competition in the term deposit market hotting up, those on the search for such a financial product need to do so with care.

Speaking to the Australian, Peter Arnold, a financial analyst at Cannex, claims that there is currently "a lot of competition" within the market, with 90-day term deposit interest rates in particular proving to be attractive.

Pointing out that the highest rates on products of these lengths are all above 4.2 per cent, competition in particular is being driven by smaller banks, while the most attractive rates on 180-day term deposits vary from 3.85 per cent to 4.3 per cent.

And although the publication points out term deposit rates of around eight per cent were being offered last year, recent cuts in the Reserve Bank interest rate means anything offering more than four per cent must be considered as being a good deal.

However, Mr Arnold advised those search for a term deposit to be realistic about how much money they want to tie up and should first enquire about what would happen if they break their contract prior they sign on the dotted line.

Meanwhile, investment expert Vishal Teckchandani in a recent Investor Daily article claimed that traders made a mad dash to invest in term deposits in an effort to avoid the worst of the damage caused by the global economic crisis.

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