Banks cut Term Rate Deposit Rates

Banks have slashed term deposit rates amid a flood of money flowing in from wary consumers and speculation that official interest rates could fall. Since the start of last week, 29 banks have cut their term deposit rates, according to rate comparison site Mozo.com.au, bringing the average two-year deposit rate down 40 basis points to 5.69 per cent. Three-year deposits have dropped an average of 47 basis points to 5.77 per cent on average in the same period.
Investors, and some analysts are tipping that official Reserve Bank interest rates - on which most savings and deposit rates are set - will fall in response to a slowing local economy and the worries created by the sovereign debt crisis in Europe.

The lingering fears, worsened by the dramatic sharemarket plunges last week, have dented consumer confidence and encouraged households to save more and borrow less.
"When demand from investors for term deposits goes up, it's often the case that rates will come down," said Damian Smith, chief executive of rate comparison group RateCity.com.au. Australian Prudential Regulation Authority data showed that banks at the end of June held just under $500 billion of cash deposits from households, up $34 billion, or 7 per cent from a year ago.
"Banks are awash with cash," said Mr Smith. Commonwealth Bank dropped the rate on a two-year deposit of $50,000 by 70 basis points to 5.3 per cent over the past week, while National Australia Bank lowered its rate by 35 basis points to 5.5 per cent.
The market is tipping a 64 per cent chance of a cut to official interest rates when the Reserve Bank meets next month. Early last week, as markets plunged following the S&P downgrade of US debt, the investors predicted a 50 basis point cut in the RBA cash rate in September.

The central bank has kept official interest rates on hold at 4.75 per cent, to which it last raised them in November.