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Interest rates on savings accounts remain around two to three per cent

SAVERS have been watching returns on their stashed cash dwindle and they’re likely to see these deals fall even further in the coming months.

Long gone are returns of five to six per cent that they were revelling in during the global financial crisis now many financial institutions are offering as little as two or three per cent on tucked away cash.

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Financial comparison website Canstars spokeswoman Justine Davies says returns on savings accounts both at-call and term deposits remain low which should prompt account holders to go on the hunt for much better deals.

Its vitally important to compare products when youre looking to invest cash,’ she says.

Dont assume that youre still getting the great interest rate you signed up to six months ago on your at-call account or that your bank will give you the same term deposit rate this time around.

Since the Reserve Bank of Australia board cut the cash rate to 1.75 per cent in May many institutions have dropped their interest rates on both at-call savings and term deposit accounts even further.

On an online savings account with a deposit of $10,000 the average interest rate is 1.68 per cent while the maximum is just 3.4 per cent.

But be wary this 3.4 per cent rate reverts to just two per cent after the first four months.

Twelve-month term deposits dont offer returns that are any better the highest Canstars database goes to is 3.05 per cent.

AMP financial planner Anthony Jones says online savings accounts are often the best way to go.

They do have conditions attached, for instance if you want to regularly save, but at the moment some of the online savings accounts are better than the term deposit rates,’ he says.

With online savers you have the benefit of having the money at-call whereas with term deposits you have to give a minimum of 31 days notice if you try and access the money early.

Jones says if you do want to steer clear of tucking away cash in the bank, your other options are property, bonds, and also shares.

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Nab jacks up investor home loan rates

NAB and Westpac have given borrowers an early lump of coal in their Christmas stocking, jacking up home loan rates for investors.

From December 12, NAB will increase its variable rates on new and existing residential investor home loans by 15 basis points from 5.4 per cent to 5.55 per cent. NABs owner-occupier variable home loan rate is unchanged at 5.25 per cent.

On a standard 30-year, $300,000 loan, the monthly repayments will increase by $28 to $1713. On a $500,000 loan the repayments will increase by $47 to $2855, and on a $1 million loan the repayments will increase by $94 to $5709.

And from December 16, Westpac will increase rates on some of its interest-only variable home loans. Westpacs owner-occupier interest-only variable rate will rise by 8 basis points to 5.41 per cent, and its investor rate will rise 8 basis points to 5.68 per cent. Westpacs equity access loan rate is increasing by 15 basis points to 5.80 per cent.

We dont make these decisions lightly, and these changes reflect the increasingly challenging environment we are currently operating in as we seek to meet the needs of all our customers and our shareholders, NAB chief operating officer Antony Cahill said in a statement.

As was evident during the recent bank reporting season, net interest margins the difference between what we pay to borrow funds to lend to our customers and what our customers pay are down, particularly in home lending, and they remain under pressure.

A low-rate environment poses considerable challenges to all lenders, and we must respond to what is happening in the economy and the market. In doing so, we have to consider a range of factors including the ongoing need to hold longer-term stable sources of funding, continued elevated funding costs, regulatory requirements, and the competitive pressures at play.

We will continue to regularly review our products and pricing, and make decisions that enable us to achieve a balance for all stakeholders borrowers wanting to buy a home or grow their business, depositors and investors seeking a return on their investment, and our shareholders who rely on our dividends.

Mr Cahill said the investor segment continued to be important for the bank, and stressed that interest rates for all home buyers were at 50-year lows.

NAB is committed to providing customers with great value and service, and home loan products that suit their needs at a competitive price, he said.

He added that borrowers seeking certainty about their repayments should consider fixing part of all of their home loan.

Switching to a fixed-rate loan is a straightforward and easy process, and I encourage borrowers to speak with their banker or broker to find out more about whats available, and if a fixed rate home loan might be right for their circumstances, he said.

Were here to help our customers as they make choices about which product may best suit their needs.

It comes after Westpac and its subsidiaries St George, Bank of Melbourne and BankSA raised rates for investors and owner-occupiers by 24 to 60 basis points. Earlier, NABs UBank subsidiary raised its standard variable rates by 10 basis points.

In October, NAB reported a lift in full-year cash earnings of 4.2 per cent to $6.48 billion. Last month, the Reserve Bank left the official cash rate on hold at its historic low of 1.5 per cent. The RBA is widely expected to hold again at its December meeting tomorrow.

Three essential tips to save money over the length of your home loan.

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