UBank USaver rate drops to 6.01%

Danam on 25/01/2012 - 12:06
Last edited 22/11/2012 - 15:13 by 1 other user

The UBank USaver rate has fallen again for the second time in 2 months - this time to 6.01%.

For all those (like me) who stuck with the compounding lower variable rate 6 months ago rather than lock in with a term deposit here is some currently relevant maths:

You can still get 6.11% with a six month term deposit. On a $100,000 deposit, the interest paid at maturity will be $3055. If you stick with the 6.01 variable rate and compounded your interest monthly, the total interest paid after 6 months will be $3040. $15 less, (If you don't compound it will be $50 less).

I don't see rates increasing over the next 6-12 months. It may not currently be a much better option to lock your money away, but those that took the ~6.41 term deposit 6 months ago will be happy now. If the variable rates continues to drop, 6.11% might turn out to be our best option.

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  • tanoshiiki on 25/01/2012 - 12:19

    UBank announced this on Facebook yesterday, which was very short notice and quite disappointing. They should have at least waited a few days for the start of a month. A drop is not good, but given the economic climate it looks like rates won't be going up/staying high for a while.

  • cuteduck on 25/01/2012 - 13:13

    I think this is the BEST time to lock in the term deposit for 6 months.

    CPI figure came out today and it is below the consensus, prompting more rate cut next month.

  • [Deactivated] on 25/01/2012 - 13:35
    +1

    An online calculator shows that six months of compounding interest is actually $3,042.88.

    I made a set of Excel spreadsheets to calculate all sorts of combinations of financial things that I like to see at once. One feature of that is, it shows the effective monthly compounding interest rate of a base rate. (What I mean is, if an account pays say %5, it shows what the real interest rate is after compounding is applied.)

    Anyway, the real (compounded) interest rate of 6.01% is 6.09%. From that I can see the difference between 6.09% (the savings account) and 6.11% (the term deposit), is 0.02%. And 0.02% on $100,000 = $1.67 less/more per month (pre-compounding).

    That $1.67 per month difference is still small enough, that it's worth it (for me) to keep money in the online savings account. I can add more to the total when I like AND access money when I need to. But I'll sure be watching sites like www.infochoice.com like a hawk!

  • lovedeals on 25/01/2012 - 13:56
    +3

    They still appear to be the best rate compared to the other high interest savings accounts.

    • Steptoe on 31/01/2012 - 17:13

      Yes, at least the best rate + more features than Rabo Bank.

  • phunkyfeelone on 25/01/2012 - 14:24

    It's a good sign for homeowners, banks will typically drop their investment rates ahead of loan rates, to maximise their margin. With all the news of job cuts, home loan rates will stay on hold or drop over next 12 months, but investment rates also go down.

    • muzzamo on 25/01/2012 - 15:29

      but a bad sign for the non mega mortgage mugs

      • Cluster on 25/01/2012 - 16:01

        I recently took out a small mortgage to build a house. I could have maybe waited longer for prices to drop, but where I live all I see is new land stock being sold as soon as it comes onto the market. There may be a glut of $500k+ housing stock but the lower end of the market still appears to be very tight.

        Not everyone is a 'mega mortgage mug'. Some people just want a small place to live.

        People trying to talk down the market are mostly trying to buy cheaper housing. I used to do that too, until I realised the often quoted 40% price drops have been coming for 4 years now and will probably be still coming soon in 4 year's time.

        • phunkyfeelone on 25/01/2012 - 17:26

          Prices won't "drop", they just won't rise at the rate they haven't done previously. But salaries will rise over the next 5 years, therefore it will become marginally easier for "mortgage mugs" to make payments. It ebbs and flows both ways each decade or so.

          Of course more borrow than save, but the government keeps bailing out people who borrow above their means - that is the worst part, for those of us on above average wages, Robin Hood politics - rob from the rich to give to the poor.

  • RedHab on 25/01/2012 - 16:58

    More people borrow than save. Expect the rules of the investing game to benefit the borrowers, and devaluation of your savings.

  • desalf on 26/01/2012 - 17:41

    http://www.anz.com/aus/promo/olsdrretarget/default.asp?sourc…

    ANZ Online Saver 6.10% - bonus 1.85% on top of standard variable 4.25% until 31st May.
    No monthly fees, unlimited internet banking. Online only.

    To be eligible, you need to have a transaction account. The ANZ Progress Saver qualifies as an eligible account, no monthly fee, unlimited internet banking. A good way to get around having to pay monthly fees.

  • [Deactivated] on 27/01/2012 - 08:46
    +1

    I wonder if UBank will match this. (They used to have some kind of guarantee stating just that. Is it still in force?) They'll probably talk their way out of it though. i.e. "The ANZ offer is temporary until May, ours is "permanent"."

    The problem I've found with chasing the best rate is, it can take 2-3 days for money to reach the new bank. For example, today you transfer (withdraw) $100,000 from UBank, so it's no longer earning interest with them. It finally turns up in the ANZ account on the 3rd day about 4:00pm. After that time, some banks don't count your money being with them on that day. So for three days you don't earn any interest.

    So on $100,000 for 3 days, you would lose $50.77 in interest. Now…

    1. If you kept that money with UBank, you would earn $510.44 interest in 31 days.

    2. If you switched to ANZ, you would earn $518.08 interest in 31 days.

    3. But you lost $50.77 over the three days it took for the banks to transfer your money.

    4. The difference in interest earned on the two accounts = $7.64 per 31 days.

    5. So the number of days it would take to "catch up" (earn back the interest you lost by switching to the ANZ) = $50.77 divided by $7.64 = about 6.5 months!

    (Someone please speak up, if my maths is wrong.)

    So of course this means if it's a temporary offer with the second bank, then it has to last for 6.5 months before it starts to be of any benefit. AND… has to be worth losing another 3 days of interest switching back again later, when their offer ends.

    If you could get the banks to switch your money on the same day, it would definitely be worth it. You can use BPAY now, to put money INTO UBank on the same day… Does anyone know if the ANZ also has this feature? And actually, can you pay BPAY using UBank? (I only use it for earning interest, not transactions - so I don't know.)

    • cairnsn on 01/02/2012 - 16:07

      It really depends on the bank.

      I find that when I make a Direct Entry funds transfer between banks (aka Pay Anyone), the money is in the target account the next business day but the transaction is back-dated with the original date for the purposes of calculating interest. For transactions on a Friday, some banks will process the incoming transaction on Saturday morning while others will wait until Monday morning.

      Of course this is assuming that the withdrawal was made before the cut-off time as specified by your financial instution (usually 6pm Syd/Melb time). If the transaction was made after cut-off time, then it will not be processed until the next business day by the outgoing bank and another business day after that by the incoming bank, even though your bank will have already debited your account. This money sits in "float" and is extra profit for the bank until it is processed.

      For UBank accounts, you will notice that there are two dates appearing in the Transaction History:

      • Transaction Date = The date UBank actually processes the transaction
      • Statement Date = The date of the transaction for calculating interest etc.

      So if I transfer funds into my UBank account today from another bank, it will appear with a Transaction Date of tomorrow (because it is processed overnight), but with a Statement Date of today thereby earning the full amount of interest, as long as I submit the transaction before the bank cut-off.

      For BPAY it's a different story as BPAY is a separate payments system. UBank only supports BPAY transactions for deposits but not for withdrawals.

  • freemoneyhunter on 31/01/2012 - 19:15

    I took all my money out of ubank afew weeks ago and bought a gold mining stock, it is up 25% already so I am pretty happy.

    http://www.southsearepublic.org/files/ssr/16/m3_money_aggreg…

    That is pretty much the reason house prices keep going up, it is also the leading item for credit growth. The chart is old, but rest assured it kept going up in the same parabolic fasion.

    • [Deactivated] on 31/01/2012 - 23:28

      You're braver than me… I've thought about it, but too scared to take the risk. You should sign up for the newsletters at Port Phillip Publishing. All they do lately is promote buying gold.

  • mehow on 01/02/2012 - 11:00

    Anyone else know of a high interest going around?

    I had a brief look at managed funds and some 3month performance is like 20%

  • cairnsn on 01/02/2012 - 16:16

    Not good news for savers. However, the interest has dropped from 6.51% a few months ago to 6.01% now which is in line with the 2 x 25bps RBA interest rate cuts.

    Its funny though, I actually received an interest rate increase in January before the latest cut.

    01-Nov-2011 PLEASE NOTE THE CURRENT INTEREST RATE IS: 6.51% P.A.
    02-Nov-2011 PLEASE NOTE THE CURRENT INTEREST RATE IS: 6.11% P.A.
    01-Jan-2012 PLEASE NOTE THE CURRENT INTEREST RATE IS: 6.21% P.A.
    25-Jan-2012 PLEASE NOTE THE CURRENT INTEREST RATE IS: 6.01% P.A.

    Perhaps it was due to their rate assurance program.

    • [Deactivated] on 01/02/2012 - 19:35

      Sure it's not the 0.1% bonus interest you get on deposits?

    • [Deactivated] on 03/02/2012 - 11:36

      I think I know what happened with the 6.21%… I think on the 1st Jan they increased the ASP Bonus rate to 0.6%. Then on the 25th Jan they reduced the basic interest rate (again). Anyway, it has something to do with increasing one rate, but reducing the other one.

  • freemoneyhunter on 02/02/2012 - 07:16

    mehow, trying asking around your friends if they want to borrow money and secure the loan with something of their property. Otherwise try www.igrin.com.au or something similar.

    • janeymac on 02/02/2012 - 13:18

      Lol. I'd probably only ask the 'friends' I could afford to lose or want to get rid of. Imagine trying to take their property should they default!

    • [Deactivated] on 02/02/2012 - 14:23

      "… not currently accepting further loan requests." (They make it hard to lend without borrowers, LOL!)

  • Danam on 03/02/2012 - 12:44

    UBank have just reduced their term deposit rates by .2% just 2 weeks after this thread was started. The new rate is 5.91%. I think there are a few people here who jumped on the 6.11% for 6 months. I got my old man and I locked in just in time. Sure we will be dropped in it in 6 months time, but it's nice to catch a break.

    For those who are still variable (and like to keep things risk free), yesterday the HSBC said to expect the base interest rate to fall to 3.25 this year. RBA say more like 3.75 - with two interest rate cuts in the coming months.

    Food for thought.

  • [Deactivated] on 03/02/2012 - 12:50
    +1

    Bad for savers. (Like me.)

    Good for hopefully bringing on a real estate crash for those that can't afford to buy a home. (Like me.)

  • Lenneth on 04/02/2012 - 16:15

    TD interest rates are now:

    1 month 3.36% p.a.
    3 months 5.61% p.a.
    6 months 5.91% p.a.
    9 months 5.41% p.a.
    12 months 5.41% p.a.

  • Lenneth on 07/02/2012 - 20:57

    Well interest rates didn't go down today. Does that mean UB will put it back where it was. No I didn't think so… LOL

  • freemoneyhunter on 09/02/2012 - 00:04

    My UML stock which I bought with the money I took out of ubank is up 35% now :) :) nice one month return there. That's almost like having the money sitting in a bank for 5 years at 6%, will have to wait a year before I sell to avoid high capital gains rate thou.

    • CuteBirdy on 09/02/2012 - 18:10

      You might win this time, but next time you can just as easily lose that kind of money with stocks!

    • [Deactivated] on 14/02/2012 - 04:07

      freemoneyhunter… Just when I start to get interested in the stock market, I read something like this. I've even considered purchasing one of those stock market newsletters. But does that penalty apply to everyone? i.e. If I had purchased that same stock - and it went up 35% - would I also have to choose between paying capital gains tax, or, leaving my money locked into that stock? (Thus effectively be locked out of punting on another trade?)

      • Steptoe on 14/02/2012 - 05:26

        Something like capital gain liability halves after holding for 12 months. If you are only in for the short term it's one of the handcaps you have to live with.

      • scotty on 14/02/2012 - 11:19

        If it does go up 35%, it is still quite favourable without the CGT concession. Remember that it's a concession — your capital gain is discounted by 50% if you keep it for more than 12 months. Even if the interest rate goes up to 35% (heaven forbids), you still have to be taxed from 100% of the interest income and there's no concession.

  • [Deactivated] on 14/02/2012 - 12:21

    So if you're pro-active and making money, they put their hand out and steal a chunk of your profits. But if you lose money, they don't help you out… Meanwhile banks get rewarded by government with handouts for being poor money managers - or simply not being as profitable this year as last year.

    Yet one more reason for me to hate the government's guts.

    So… how do they even know about about your stock market activity to take money from you? (Or is it just worked out once a year when you do your tax return?)

  • superadmin on 15/02/2012 - 16:38

    "I don't see rates increasing over the next 6-12 months. It may not currently be a much better option to lock your money away, but those that took the ~6.41 term deposit 6 months ago will be happy now. If the variable rates continues to drop, 6.11% might turn out to be our best option." Comment: A lot of the major banks have just raised their interest rates for mortgages

    • Danam on 16/02/2012 - 10:11

      I hear what your saying, but the best interest rate on term deposits has just fallen again. To 5.81% this time. The demand for deposits has dropped so the rates offered by banks for deposits is falling towards the base interest rate of 4.25% - (they are cutting the bonus offerings).

  • freemoneyhunter on 26/03/2012 - 13:37

    Just to update, uml is up 50% now since I bought it.

    :)

    • [Deactivated] on 27/03/2012 - 03:39

      Two questions for you:

      1. Did you pick that yourself, or do you subscribe to one of those stock tip emails?

      2. If you sold, what's the percent you'd lose in tax? (And does it only come off the amount it increased by - or is it off the whole amount?)

      • Trance N Dance on 27/03/2012 - 17:13

        This is off the top of my head from what I can remember from high school economics (made a tangent from the course when we did the share trading game for students), so some of this may or may not be wrong, I'll be happy for someone to correct me if I'm wrong.

        The proceeds from the sale of shares is treated as a source of income.
        If you sell the shares after holding onto them for less than 1 year you only pay taxes on the profit. The buy price is considered to be a cost and is removed from the sale total, meaning you only pay taxes on the profit at whatever tax bracket you fall into.

        If you hold onto the shares for longer than 1 year, any profit will be considered as captital gains tax, IIRC that means to calculate tax you only add half the value of the profit to your taxable income and then pay taxes at whatever rate you then fall into.

  • [Deactivated] on 27/03/2012 - 18:56

    Ok, thanks. If they take into account the tax bracket you're in, then that's not as bad as I first thought. I guess you probably can claim the cost of making the trade as a deduction too… i.e. Any trade/broker fees for buying/selling the shares.

  • freemoneyhunter on 27/03/2012 - 22:16

    realfamilyman, I did my own research for picking the stock, I do my own work, I do not follow other people's recommendations. I believe you will lose money if you follow the stock tip newsletter hustlers. Learn about Market Capitalization, that is my main metric I use as I can tell how cheap a stock is. I will wait a year until I sell. Brokerage is not much, about $20 to buy & sell.

  • [Deactivated] on 01/04/2012 - 00:46

    Hats off to you. I've started to read books on the stock market several times, but I always give up, what with the vertical learning curve. I've been receiving emails from Port Philip Publishing (I believe they're called) for a couple of years now. They used to often quote xxx% returns (yes, with that many digits). But who knows if it was true… They seem to have stopped that habit though - for months now. So maybe they're not doing well anymore, LOL.

    They want a couple of grand I think, to receive their tips. I nearly signed up a couple of times. But I want to understand WHY I'm doing something for myself. So I guess I'll just have to put up with 6% from UBank. :-(

  • freemoneyhunter on 01/04/2012 - 19:40

    realfamily, you can not trust anyone else to manage your money but yourself. Goto hotcopper.com.au and read some threads about stocks and get a feel for it. Also buy a stock when people are not very interested in it, but it looks like good value to you. Always try to work out the value per share you are buying by measuring the market capitalization of the company.

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