Term deposits loses allure

Term deposits shed 36,000 customers over the last 12 months, even as the self-managed super funds (SMSF) continue to dabble in cash. 

The Roy Morgan Consumer Single Source Survey showed term deposit holders fell to 1.97 million over the past year as low interest rates deter customers. 

On the other hand SMSFs continue to see appeal in cash investments, which soared to $156.2 billion during the March quarter, up from $153.7 billion in the December 2013 quarter, according to the Australian Taxation Office data.  

“While term deposits generally remain the major source of bank funding, the rapid growth in the alternatives such as bonus interest/reward saver accounts and mortgage offset accounts provides real alternatives for many customers,” industry communications director Roy Morgan Research Norman Morris said. 

Customers seem to be flocking to bonus interest or reward save accounts, which jumped by 709,000 account holders to a total of 4.55 million. 

High interest online accounts also did well, with 5.88 million Australians holding them, a jump of 102,000 over the past 12 months, as customers look for higher interest rates in a low interest environment. 

Mortgage offset account holders shot up by 181,000 to 1.43 million. 

The four big banks all lost customers in term deposits, with Westpac losing 60,000, the Commonwealth Bank (CBA) losing 31,000, NAB losing 15,000 and ANZ losing 10,000. 

The CBA gained 375,000 customers in its bonus interest/rewards saver accounts and 56,000 in its mortgage offset account, while Westpac gained 208,000 customers in its bonus interest/reward saver accounts.