Forman Financial Services

Term Deposits, Loans & Offset Account

Banking 1 – Term Deposits

If you have invested in term deposits recently you may have received a notification from the bank requiring you to give the bank 31 days’ notice if you want to withdraw your money early. The new requirement born from a new reform called the “Basel III Liquidity Reforms” took effect from 1st January 2015. The reform is an attempt by the government to stabilise the banking system and try to minimise the risks that we faced in the highest point of the Global Financial Crisis where there was a real a threat that the banking system would collapse.

Banking 2 – Mortgages

Official interest rates have dropped again and some banks announced that their variable mortgage interest rates reduced accordingly. However, after the announcement we did come across some variable loans that were not being reduced by the bank. When we investigated we were advised by the bank that the interest rate reduction may not automatically be passed on to existing clients.  We therefore recommend that if you have mortgages you should contact your bank and check the rate you are currently paying. As a rule of thumb if your rate is above 4.75% you are paying a high rate.

Banking 3 – Offset

If you use an offset account you need to check that the bank is fully offsetting the interest from the mortgage based on the balance of the offset account. Some banks will only pay partial offset if the loan is fixed. It is then supposed to turn into a full offset if the loan is changed to a variable. We came across a situation where a loan was changed from fixed to variable however the bank did not activate the full offset for over 2 years. When we investigated the bank regarded the error as a “glitch” (using their words).

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