Term deposits remain an enduringly popular banking product in Australia and each year CANSTAR research and rate the term deposit products available from Australian financial institutions. This year we have researched 99 term deposits offered by 79 providers. We compared each product across two term deposit amounts, $10K and $75K and six weighted term tiers. In 2015 CANSTAR is pleased to announce that ME (formerly ME Bank) is winner of the Bank of the Year – Term Deposits Award.
We caught up with ME Head of Deposits and Transactional Banking, Nic Emery for some insights into current customer behaviour.
Q: Despite a low official cash rate, cash seems to have retained its popularity as an investment. Why do you think that is?
A: In a volatile environment, investing in cash is still a good option important because banking deposit products provides guaranteed security up to $250,000 by the Federal Government. Plus, there are good deals to be found.
Term deposits are actually very high right now relative to the cash rate. The global financial crisis hit traditional bank funding sources and created a need for other funding sources, including retirees who want to invest their savings in something low risk. That increased competition for term deposits and pushed up rates up for these products. So while borrowers generally complain about deposit rates being low, they could be much lower.”
Q: What are some of the most popular terms that your customers choose?
A: Research confirms that 1 in 3 term deposit holders choose a 7-12 month term deposit – these terms have been steadily trending upward in the past few years while 4 to 6 month terms have steadily declined.
However customers are generally more interested obtaining the best rate over the term.
It′s always worthwhile checking rates across all banks and terms before signing up or rolling over – otherwise you may miss out on a great deal elsewhere.
Banks tend to test demand for different rates by offering specials, which means at any one time you′re likely to find one or two banks offering a significantly higher rate than the rest of the market.
Despite the low cash rate, ME has grown its term deposit portfolio over the last 12 months due to consistently good rates. For instance, ME is currently offering 2.90% on 4, 8 and 12 months terms.
Q: Have you noticed much change in the demographic make-up of term deposit customers over the past few years?
A: The majority of people who choose term deposits are over 55 years of age – this has remained stable over the past few years. However we′ve also seen a steady increase in the proportion 18-24 year olds taking out term deposits over the past few years.
Retirees – who want to invest their savings in something low risk – appreciate the fact that term deposits are guaranteed security up to $250,000 by the Federal Government.
CANSTAR congratulates ME on its win. Readers can download the CANSTAR report here.