Savers are being encouraged to take advantage of the current favourable returns of term deposits as they may be short lived, according to RateCity.
Australians with no debts and extra cash can benefit from the current deals in the term-deposit market as long-term funding is clearly a high priority for financial institutions, according to RateCity chief executive Damian Smith.
The financial comparison website found smaller institutions offer returns of up to 1.2 percentage points higher than the major four banks for term deposits.
The benchmark three-month term deposit rate, which is the average of the major four banks, for one of the most popular terms is 3.68 per cent. This compares to the rest of the market, which has an average three-month term deposit rate of 4.88 per cent.
The difference between the benchmark six-month term deposit rate and smaller financial institutions is 94 basis points, and Smith predicted this difference would be short lived.
"While no one can be certain how these rates will move, savers would be wise to assume that rates will come off the boil and move fast to get the best deals now," said Smith.
The most aggressively priced term deposits on RateCity include three-year terms, where one of the highest rates on the market is 7 per cent by MECU, almost 1.8 percentage points above the Money Market rate.
"People should also remember that the Federal Government has introduced new tax incentives for savers from 1 July. Half of the first $1,000 of interest earned on deposit accounts is tax free – so it's a great time to take advantage of high returning accounts," Smith said.
However, he urged Australians to make sure they understand all the terms and conditions when comparing term deposits, with particular emphasis on what happens at the end of the term, such as transfer fees charges.
