Banking & Saving - Banks offering term deposits rates 'above official benchmarks'

Term deposits are being offered to customers above official market benchmarks, the Reserve Bank of Australia says.

Some banks are offering term deposits and savings rates above official market benchmarks, according to the Reserve Bank of Australia (RBA).

The organisation believes rates are being increased by the major Australian banks in order to win more customers, such as an increase of 180 basis points above the three-month bank bill rate, compared to 75 basis points in December 2008, the Australian reported.

This has led to a selection of term deposit rates being higher than mortgage rates for the first time in two decades.

Banks have competed "vigorously" with each other, which has led to an increase in their interest rate, the RBA said.

It noted: "The heightened competition for deposits has added to banks' average funding costs."

The Commonwealth Bank and Westpac both have the highest term deposit rates at six per cent, in comparison to National Australia Bank (NAB) – which offers NAB savings accounts – charging 5.87 per cent.

Ralph Norris, chief executive for the Commonwealth Bank – which has a range of credit cards – suggested the war on deposits had eased recently.

"But it's been interesting to see over the last two to three weeks it has moderated somewhat as far as pricing is concerned. I think that's because banks are seeing it's somewhat of a zero-sum game," he added.

According to research by Canstar Cannex, the average rate of terms has nearly peaked as high as in 2008, however the cash rate was double its current total at the time.

Overall, the official rate is now four per cent, although the average is 5.93 per cent.

Earlier this month, Westpac announced it would soon charge its credit card customers interest on top of their interest and treasurer Wayne Swan implied it was not the first time it had tried a similar tactic, calling the bank a "serial offender" with taking customers "for a ride".

By Nate Sawyer