The impact of mortgage rate decreases on term deposit rates

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Transcription

Announcer: Your family’s number one, it’s 96.5 on a Wednesday evening and it is that time of the week to catch up with our lovely finance expert, Helen Baker. Good day, Helen how are you!

Helen: I’m good, how are you doing?

Announcer: Good thank you, good thank you, now this evening you’re going to talk to us, we’ve been all excited about interest rates and everything like that, but you’ve got – you’re not being a party pooper, you just want us to be aware of some of the downsides to the interest rates going down.

Helen: That’s it. So, obviously the interest rates that are charged on a home loan, help the banks to do quite well for themselves, but conversely the other way, they are loaning out at a small amount. They are going to make their deposits, the term deposits are going to be interest rates on their investments very low to compensate on that because they still want to make a profit. So basically people who are putting money into term deposits or they are investing in what we call defensive assets, so it could even be through their superannuation funds, then they might find that those returns are incredibly low.

And even if it’s like 2%, and the argument is that inflation is at least 3%, then your money is actually going backwards. So you need to make some decisions about where is the big play to hold your money and might not be term deposit or something like that, so investigate your options, get some advice and make wise decisions so that your money does better for you than going backwards.

Announcer: Wow, so things you don’t even think about, you just get all excited about one side of it, but you need to think through the other side.

Helen: Yeah, it’s the old, what goes up and the other side is going down, yep.

Announcer: And that is why we have you to talk us through it. Thank you very much, Helen.

Helen: You’re very welcome, take care.

Announcer: Have a great week and if you want to find out more, then make sure you go to OnYourOwnTwoFeet.com.au.