Can the banks do better for investors in

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BANKS haven’t been a good place for your money this year.

Whether you had cash in savings accounts, invested in bank shares or borrowed money to invest in real estate, in most cases the news has been negative.

However, experts say the worst may be behind us and 2016 is looking like it will be a solid year, across the board.

SAVINGS ACCOUNTS

The sinking feeling for savers and retirees continues, with interest rates paid on term deposits and online savings accounts today about one-third of what they were four years ago.

Research group Canstar said average rates on term deposits dropped by up to 0.91 percentage points this year, far more than official Reserve Bank rate cuts, and now sat between two and three per cent depending on the term.

There was no relief for savvy consumers who shop around, with the maximum term deposit rates on offer also dropping significantly over the past 12 months, Canstar spokeswoman Justine Davies said.

The real trick with term deposits is to keep an eye out for specials with smaller institutions. Often some of the smaller institutions will have some terrific term deposit deals on specific terms, for example, a seven-month term.

Ms Davies said she expected little change in deposit rates in 2016, while Baillieu Holst chief economist Darryl Gobbett said the Reserve Bank looked likely announce another 0.25 percentage point rate cut, which would push some term deposit rates below 2 per cent.

SHARES

Big bank shares had a rollercoaster ride, surging in the early months before falling heavily, and recovering some of their losses in recent weeks. ANZ shares are down 15 per cent for the year, NAB down 11 per cent, the Commonwealth Bank down 2 per cent and Westpac down 1 per cent.

However, share price weakness has been offset by strong dividend income, currently paying an effective interest rate between 5.1 and 6.8 per cent, plus tax credits.

Mr Gobbett said since 2009, ANZ and the Commonwealth Banks dividends per share had climbed more than 80 per cent while Westpacs and NABs were up more than 60 per cent.

However, if you had paid the high price in the early part of 2015 having just chased the yield, you would be nursing capital losses which would not have been offset by the higher-than-term-deposit yield, he said.

In 2016 we are expecting slower dividend growth than in recent years due to the regulatory issues facing the banks.

CMC Markets chief market analyst Ric Spooner said regulatory changes were among a number of headwinds that pressured the banks this year.

Dividend growth slowed to a crawl as regulators demanded banks have more conservative balance sheets, but Mr Spooner said 2016 showed prospects for a pick-up in lending and business activity, helped by a low Aussie dollar.

I think it will be quite a solid year for bank shares. Theyre not a bad place for investors to be now, he said.

I think they have been beaten up a little too much.

PROPERTY INVESTING

The big banks announced controversial rate rises for investment loans in August, blaming the regulatory changes, and later followed up with broader rate rises despite the RBAs cash rate being on hold since May.

Most other lenders followed them, and experts think more rises are on the cards.

Mortgage rates are likely to trend higher, independent of the RBA cash rate as regulatory issues continue to demand a more stringent lending process, Mr Gobbett said.

Ms Davies said overall investment loan interest rates decreased slightly in 2015 thanks to two RBA rate cuts before June.

Investment home loan rates have already been tightened, but the big four will still need to extract greater margin due to the capital changes. We may see a further increase in investment loan rates in 2016 to aid this, she said.

There is still sharp competition in the market. Im sure all property investors are well aware already, but it pays to shop around.