All The More Reason To Save!

Saving for a rainy day is always a wise decision. Saving in a bank is even wiser since you also earn from the money you have set aside. There is even more reason to save nowadays because the interest rates are in their all-time high. This came after the Australian government’s decision to withdraw funding guarantees to banks. The wholesale guarantee offered by the government to banks will be withdrawn starting on March 31.

Right after the government’s decision, many of the banks now are engaged in filling their funding base through their customers’ savings accounts. They are clamoring for more clients and encouraging their depositors to save more by offering great interest rates on savings. The new interest rates are as high as 7% for a three-year term deposits and 8% for a five-year term. These rates are a big leap from the average 6.6%. For the first time in almost two decades have the interest rates on savings exceeded the mortgages rates. Approximately 40% of the mortgage books of various banks are actually financed by retail deposits, which are seen by analysts as a crucial element in the funding need of many banks.

The deposit market is now in the midst of an ongoing battle where many lenders are offering attractive rates to attract more clients. There are a number of banks giving deposit rates, which are higher than the average mortgage rate. The last time this phenomenon happened was in the mid-1980s, but there was also a ceiling on mortgage rates at that time.
This is clearly the right time to save substantially despite the burgeoning cost of living. Your bank savings account can fully capitalize on this new deposit market trend. This may serve as a far wiser decision in the long run.

In truth, the banks have been working on encouraging more deposits ever since the global financial crisis. They have come to acknowledge the relevance of the more conservative method of retail banking. They have chosen to take a different direction away from the wholesale funding market that banks have previously focused on.