Rates for savers depositing $50,000 for a 12-month term deposit have on average increased by about 7 basis points to around 2.55 per cent, according to Canstar.
That compares to about 6 per cent gross income from ASX300 shares and around 2.5 per cent from net residential rental income.
Equities volatile
But Australians continue to increase household debt rather than pay down their credit cards and mortgage debt, according to analysis by the Reserve Bank and Australian Prudential Regulation Authority.
For example, despite interest rates of up to 23 per cent more than half a million Australians have overdue credit card debt, almost 1 million had persistent debt and 435,000 were repeatedly repaying small amounts.
Richard Holden, a professor of economics at UNSW Business School, said lower saver rates will continue to pressure savers to move to higher risk options.
“The main risk is that the higher-risk investments – such as stocks – are more volatile,” Professor Holden said.
“If a saver is going to retire in, say, the next five years then a sharp downturn in the stock market is terrible for them because they need to access the capital and don’t have time to save more or wait for the market to rebound,” he said.
Andrew Peters, managing director of Semaphore Private, an authorised financial adviser, added many investors attempted to boost income buying real estate where net yields – after taxes and expenses – are around 2.5 per cent and capital returns are under pressure from the real estate downturn.
“We think cash deposits are a useless asset,” said Mr Peters, who seeks higher returns from grossed-up ASX dividends.
Mortgage lending books
Steve Mickenbecker, group executive for financial services at Canstar, said the big four had “more aggressively” cut savers rates than online accounts, mutuals and building societies.
“They have taken part of the margin from saver deposit to fund lower price offers for new mortgage business,” Mr Mickenbecker.
The big four are continuing to restructure their mortgage lending books in response to an increasing mix of reputational, prudential, liquidity, funding and regulatory risk pressures.
Many are offering big discounts, cash incentives and other inducements to borrowers to meet tough-new lending guidelines.
Virgin is blaming funding costs for increasing principal and interest and interest only rates variable home loans.
from Viral up Blog http://bit.ly/2Cnz8TF
0 Comments