Term deposit rates take a dive

The moves come as the Government intensifies its campaign to talk the banks into passing on any coming cut in interest rates.

In a sign that banks believe borrowing costs have peaked, many have got around to cutting their fixed-interest rates for home mortgages.

But they reacted much faster to deny customers the benefit of high interest rates on their savings, figures from the market researcher InfoChoice show.

In the past three weeks, ANZ and Westpac have cut 0.25 percentage points from 90-day term deposits for $25,000.

The National Australia Bank and Macquarie ped 0.40 percentage points from its term deposit rates, while Suncorp has cut 0.30 points.

For the banks, term deposits remain a relatively cheap source of funding, despite the reduction in their borrowing costs over the past month as credit turmoil eases.

Macquarie has been heavily promoting the 8.08 per cent customers can earn on savings in a six-month term deposit account.

On the positive side, the fall in short-term funding costs for banks has allowed them to cut fixed-rate mortgages.

But the cuts - which benefit borrowers locking in their mortgages for up to 10 years - for the most part have not been as big as the cuts in term deposit rates.

InfoChoice figures show that the four biggest banks have cut between 0.20 percentage points and 0.50 points on their fixed-rate mortgages.

Many smaller, non-bank lenders have started to cut their fixed-interest rates in line with the banks.

On Friday, RAMS Home Loans, The Rock Building Society, and even Macquarie Mortgages, which is negotiating its exit from the mortgage market, ped their fixed rates.

Yesterday, Federal Treasurer Wayne Swan added to the pressure on banks to pass on the next rate cut, expected as soon as next month.

"It's all pretty simple - when the official interest rate goes down, if it goes down, then borrowing costs should follow, it's really that simple," he told ABC Television.