Bank’s Deposit War Gives Investors An Edge

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Elevating interest rates quickly deplete resources in the financial and stock sectors, which could result in higher returns for investors.

According to the chief executive of fixed income intermediary Curve, Andrew Murray, “Banks might start offering higher rates closer to their mortgage offerings within the next 18 months. This could be great news for investors!”

Interestingly, the establishment of the Term Funding Facility (TFF) during the darkest days of the COVID-19 pandemic by the Reserve Bank is not just due to rising cash rates. The RBA facility provided low-cost fixed-rate funding for three years to all banks that needed to be repaid by mid-’24. This fact alone is driving potential rate hikes now more than anything else.

Analysts predict banks will soon offer higher fixed-rate savings products to attract new customers.

In addition, major Australian lenders like Westpac and ANZ have already announced plans to raise rates on certain fixed-rate home loans. This suggests we will see even more aggressive moves from other financial institutions shortly.

“It’s a cash rate war, so investors should be looking for savings products that offer higher interest rates,” says Murray. “This could lead to banks competing more aggressively against each other than usual, which would mean even better returns.”

The news is especially good for those looking to make long-term investments. With investment returns at record lows, any additional return that investors can get on their hard-earned money will be a godsend.

Millennials may look to take advantage of the rate war, as they tend to have less disposable income and limit their investment portfolios to only low-risk assets.

“Most Millennials are in a position where they have limited options to make real money on the financial markets,” says Murray. “That’s why this may be their chance to get ahead, as banks start competing with each other for investor dollars.”

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