Term deposit rates falling

AMP Capital chief economist Shane Oliver said term deposit rates had started to fall because banks are cashed up as consumers choose to save rather than spend. And if interest rates fall they are likely to fall further.

“The banks’ deposit base is quite high and if anything they are awash with cash, and credit growth is weak so consequently they have reduced their deposit rates,” he said.

“That, combined with the recent sharp fall in share prices, means that the dividend yield that you get from bank shares is far more attractive for investors than investing in their term deposits." The downside for investors is share market volatility.

Source: The Daily Telegraph