TD hybrids come to market
Increased investor demand for high-yield savings accounts, term deposits and other cash-based products has prompted deposit-takers to start innovating in a market that has long had a staid image.
Investec has launched a savings account called the 32 Day Notice Account, which has elements of an at-call account and a term deposit. There is no maturity date but depositors must give 32 days' notice of withdrawal.
The rate, which is currently 5.9 per cent, is reset weekly. Investec has given a commitment that the rate will always be at least 100 basis points above the official cash rate - currently 4.75 per cent.
Investec started offering the product to its established customers late last year and has also offered it through fixed interest brokers. The bank plans to offer it more widely later this year.
Colonial First State has used a similar combination of a floating interest rate structure with a fixed term in the hybrid term deposit account it launched in April. First Rate Saver, which is offered on the FirstChoice platform, has a rate that is reset as the Reserve Bank changes rates. It pays one per cent above the cash rate.
The money is managed by Commonwealth Bank and will be counted as household deposits in the Australian Prudential Regulation Authority's monthly banking statistics.
First Rate Saver matures in April 2017. Colonial has a liquidity facility for investors who want to get their money out early but there may be a cost. The current product disclosure statement is open for 12 months; Colonial expects to launch a new six-year term when the current PDS matures.
Colonial's general manager of funding, Graham Hand, said: "Because the rate on this product moves as the cash rate moves, it will play the role of an inflation hedge in portfolios."
Earlier this year, ING Direct added a "pick a date" option to its term deposit range. Investors can choose any maturity date beyond a minimum term of 30 days and within a maximum of one year.
ING Direct's head of deposits, Brett Morgan, said: "Investors can be constrained by the terms placed on them by their provider. This allows them to tailor their terms to meet specific requirements.