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Term deposits rates remain high

The headline rates on term deposits remain high, with one and three-year deposit accounts still the best in the market. The one and three-year term deposit rates are up to 250 basis points above the bank bill rate. Westpac chief executive Gail Kelly last week warned she would not embark on an online savings war. Westpac has been one of the most aggressively priced banks for term deposits in the market.

Macquarie research found that the pressure on margins from higher retail deposit rates would not be as bad for the banks with greater residential lending market shares, being Westpac and Commonwealth Bank.

It had been assumed the banks with more institutional lending, particularly NAB and ANZ, would be able to offset some of the higher deposits costs by jacking up their business lending rates. However, Mr Turton said there was greater competition returning to the business lending market, which limited the banks' ability to raise rates.

Source: The Australian

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