At-call rates soften but TD market remains competitive

John Kavanagh

The heat has gone out of the at-call savings account market, with a number of institutions reducing introductory rates over the past month. But there is still plenty of action in the term deposit market, where rates are still moving up.

Virgin Money set the pace for the at-call market when it launched an online savings account last July with an introductory rate of 6.75 per cent for four months. That rate has dropped back to 6.51 per cent. The base rate remains unchanged at 5.35 per cent.

Virgin’s introductory rate now matches UBank’s offer of 6.51 per cent for customers who make regular monthly savings. The UBank base rate is 6.01 per cent.

RaboDirect relaunched its brand last May and set a 6.4 per cent introductory rate for its online savings account. That rate how now dropped back 6.1 per cent (if the account holder deposits a minimum of $200 a month) on a base rate of 4.75 per cent.

Citibank has maintained an introductory rate of 6.45 per cent (with a base rate of 5.25 per cent).

Credit Union Australia was running a four-month introductory rate of 6.3 per cent in the fourth quarter of last year but is not currently offering any introductory rate. Its base rate is 5.15 per cent.

Hunter United has maintained a base rate of 6.37 per cent, which it introduced in August.

ING Direct has a four-month introductory rate of 6.35 per cent and a base rate of five per cent.

Other deposit-takers offering more than six per cent include Defcredit, ANZ, Bank of Queensland, BankWest, Bankstown City Credit Union, St George Bank and East Street.

In the term-deposit market the sweet spot for savers looks to be 180-day terms. Infochoice lists close to 30 institutions that are offering six per cent or more on six-month terms.

Bank of Queensland has the top 180-day rate, at 6.45 per cent, followed by RaboDirect (6.4 per cent), Laiki Bank (6.3 per cent), Heritage Building Society (6.25 per cent) and MyState Financial (6.2 per cent).

Since the beginning of the year, rates on three, six and 12-month terms have gone up by as much as 100 basis points. Infochoice lists more than a dozen institutions that have raised term deposit rates since the start of the year.

A couple of the big banks have had to realign their TD rates to meet the market. Westpac added 235 basis points to its 180-day rate on January 21, taking it to six per cent. St George Bank has added 240 basis points to its 180-day rate.

Commonwealth Bank added 230 basis points to its nine-day rate on December 21, taking it to 5.5 per cent.

With at-call and six-month term rates on a par, savers will have to take a bet on whether they think rates will go up in the first half of the year.