101 of finance always told us, the longer the term deposit rate the more interest you should receive. (on the condition of normal interest rate curve, which is the case here in australia…surely)
So when i check out ubanks, 4.91 savings account (with bonus) and the term deposits, i just cant understand why the on call account pays more interest than the locked in term deposits.
Why would anyone use the TDs if they pay lower rates….
anyone got any ideas…
Why would anyone use the TDs if they pay lower rates….
because you can lock your money in at that rate. i'm sure people who locked in at 7-8% a couple of years ago would be quite pleased with themselves today
Fixed rates, be they term deposits or fixed mortgages, will be dependent on market expectations of future interest rates.
Also, the savings accounts usually have initial bonus interest.
A lot of people will go through the rigamorole to set up a new account but then leave it there when the bonus finishes - so the bonus becomes a marketing cost really.
That is a pretty good rate for an "at call" account, but will it last? You might as well use it while it is available.
It's all a gamble and you would expect that their professional crystal ball gazers know more than we mortals.
Normally the offered rates for term deposits give you a feel for what the professionals are expecting in terms of trends, but there can be a bit of distortion if the particular bank has a known need for extra funds for a particular upcoming project (or a marketing campaign)
10 Year accounts (or longer) are tax free I believe..
Therefore effectively increasing the interest because you don't have to pay tax on it.
10 year savings or TD accounts? do you have any more info?
Looking further, it looks like I was thinking of bonds..
Maybe in a dream world. Not in Australia.
hes talking about Treasury Bonds, which are tax fee..
So basically, everyone's explanation is thst the yield curve is inverted. Which I don't believe it to be, but that's fine, it's the only explanation in finance, thou I think there are other more practical forces at work, such as cost structures, competition…but was hoping someone in ozbargain works in a bank!
I asked the same question a few years ago in another forum. They replied they do it because they can't control themselves. They were prepared to take lower interest to stop themselves spending, LOL.
I prefer the higher interest. You can keep adding to your deposit without opening a second TD, fees, etc.
As someone pointed out, it's gamble. Like variable rate vs. fixed rate loans. But it's often mentioned that those on variable rate home loans nearly always come out better off. (Paying less.) I suspect the same applies here. (Those getting the highest interest rate come out ahead in most cases.)
I guess the different rates for different periods that a given bank is quoting for their term deposits give a rough idea of the current (pesimistic) expectation of how the banks expect the rates to change over these various time periods (presumably taking into account they will try to err on the cautious side to make sure they keep their profits up!).
I think it's only really uBank that has this weird system with their deposit rates, most other banks still provide a higher interest rate on the term deposits
Rams are currently offering 5.01 providing you set up a $200 per month addition to funds. This is far better than UBank ( who used to be the no. 1 ) but now only give 4.75
You mean 4.91%, not 4.75%.
ME Bank 5.1% is still the way to go at the moment!
ME Bank -Pretty quick to open online too
(not as quick as Ubank -that was quicker than going to branch !)
The bank speculates the rates will fall.
Even if they do rise, they have nothing to lose by offering you a fixed low rate.
I think that depends on whether it's curving up or curving down. If the long term prediction is RBA lowing the interest rate, then TD would be paying less, wound't it?