Savers squeezed again by rates

Interest rates on term deposits continue to fall. Source: National Features

INTEREST rates on fixed deposits have been squeezed recently and longer-term savings are among the hardest hit.

Australian homeowners have welcomed plummeting rates but the same cannot be said for savers.

An analysis by comparison site Mozo has found the average rate on a 180-day term deposit this month is 3.89 per cent, compared with 5.45 per cent two years ago.

In March 2011, 12-month term deposits attracted an interest rate of 6.07 per cent compared with 4.03 per cent now, while two-year fixed deposits had an average rate of 5.97 per cent compared to 4.07 per cent now.

Mozo spokeswoman Kirsty Lamont says the battle for deposits has slowly eased.

"One and two-year rates in particular have fallen sharply and by more than the fall in the cash rate since March 2011," she says.

"The banks are not competing as hard for deposits as they were in 2011 and 2012."

However, ING Direct's executive director of customer, John Arnott, says the "savings habit has stuck".

"The average term deposit has slightly shortened to about eight months ... that's shortened from a month or two," he says.

"Customers out there are looking for certainty and also flexibility when their term deposits mature."

UBank general manager Alex Twigg says he has seen a 10 per cent growth in the amount of term deposit accounts since October, but he has seen the opposite customers opting for longer terms.

"The average length that people are taking TDs out has grown, currently the average length is over seven months," he says.

"They are moving away from the three to six month terms to six to 12 months."

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