Shop Around For The Best Interest
Sydney Morning Herald
Wednesday February 8, 1989
AN irritating aspect of the big lift in home loan rates in the last six months or so is the way in which it has not been accompanied by an across-the-board rise in the rates paid on deposits.
Most of the major institutions have increased mortgage rates by at least 1.5 percentage points but have increased some deposit rates on savings accounts by a mere 0.25 percentage points.
This is not to say that some investors aren't benefiting from higher rates. On the contrary, there have been big increases in the rates being paid on term deposits. In some cases, the rises have exceeded 3 per cent.
However, such increases benefit a relatively small number of investors compared with the extremely large group who operate the various savings and investment accounts offered by banks and building societies.
An example of this pattern is the way in which the National Australia Bank has adjusted its rates over the last nine months, when its home loan rate has risen from 13.5 per cent to 15 per cent.
At the start of the period, its major savings account, the Everyday account, was paying 7.5 per cent on less than $1,000, 7.75 per cent on the total balance for amounts between $1,000 and $1,999, and 8.75 per cent from$2,000 to $9,999. Today the comparable rates are 8.5 per cent, 8.5 per cent and 9 per cent - in the last case, a rise of only 0.25 percentage points.
Similarly, the rate on less than $1,000 in its savings investment account has risen by the same tiny amount (from 6 to 6.25 per cent), while for $1,000 to $4,999 it has gone from 7 to 7.25 per cent and from 7.5 to 7.75 per cent for $5,000 to $9,999.
Savers should not assume that they are benefiting from rising rates. Unless they shop around and switch funds into term deposit accounts, often they will be missing out.
And even when deposit rates have been subjected to a major overhaul, as in the case of the St George Building Society, some savers have still lost.
In the case of St George, the change involved a commendable shift to paying interest on the minimum daily balance in an account, rather than minimum monthly balance. However, St George decided that interest on its main account, known as Freedom, would no longer be paid on the whole balance.
While St George quotes a rate of 11 per cent for amounts of $2,001 to$10,000, the first $500 only receives 5 per cent, while the next $1,500 gets 8 per cent. Only every dollar over $2,000 gets 11 per cent - a rule which results in the actual interest on $5,000, for example, being 9.5 per cent, not 11 per cent.
© 1989 Sydney Morning Herald
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