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Banks axe savings rates as RBA tipped to make Melbourne Cup Day rate cut

Banks axe savings rates as RBA tipped to make Melbourne Cup Day rate cut

Banks are slashing their savings account rates in the lead-up to a widely predicted cash rate cut in November.

Thirty-one banks across Australia, including the likes of Westpac and ANZ, have trimmed savings rates in the past two weeks, according to RateCity data.

The average savings rate cut over the past fortnight was 14 basis points.

The biggest rate cut recorded was from P&N Bank, which axed its Hi Saver base rate and bonus rate by a combined 40 basis points, bringing the account’s maximum rate to 1 per cent.

Meanwhile, Westpac and its subsidiaries, including St George, Bank SA and Bank of Melbourne, cut its maximum savings account rates by 10 basis points last week.

The maximum savings rate a customer can get across the Incentive Saver and Maxi Saver is now 0.80 per cent.

Savings rates among the big four banks have steadily dropped over the past year, RateCity records showed.

The average big four maximum savings rate plunged from 1.69 per cent in October 2019 to 0.69 per cent in the past week.

NAB holds the title of offering the highest max rate of 0.80 per cent, while ANZ and Westpac’s max rate has seen the biggest fall in the past year of 1.15 percentage points.

November rate cut becoming more likely

The cuts came after Reserve Bank of Australia (RBA) Governor Philip Lowe hinted at a potential cash rate cut in a speech in mid-October, saying that a rate cut at this point in the pandemic could deliver more impact.

“When the pandemic was at its worst and there were severe restrictions on activity, we judged that there was little to be gained from further monetary easing. The solutions to the problems the country faced lay elsewhere,” he said.

“As the economy opens up, though, it is reasonable to expect that further monetary easing would get more traction than was the case earlier.”

RateCity research director, Sally Tindall, said it was likely that if a Melbourne Cup Day rate cut happens, many savers will feel the squeeze amid growing financial stress due to the roll-back of JobKeeper and JobSeeker.

“The RBA has a balancing act to play. Any rate cut is likely to be passed on to the millions of Australians who have money in the bank,” she said.

“However, with savings rates already hovering just above zero, many savers have already given up on the prospect of earning interest from their income.”

Yet more Australians are keen to save their money during the recession, with savings levels anticipated to remain high for the next three years, according to IBISWorld research.

Household net savings swelled to $42 billion from $7.1 billion in the June quarter, data from the Australian Bureau of Statistics (ABS) found. This was attributed in part to a $35.2 billion reduction in spending due to temporary business shutdowns.

Ms Tindall expects banks will face pressure to pass on rate cuts to mortgage borrowers, particularly existing customers.

“Lenders have been aggressively cutting variable rates over the last six months, but by and large these cuts have been reserved for new customers, or people willing to fix their rate,” she said.

“There are thousands of existing mortgage holders out there who aren’t in a financial position to switch banks. Any rate relief needs to be filtered down to them.”

Big four bank: Conditional ongoing savings rates

BankAccount1 Oct 2019 max rate13 Jan 2020 max rate7 April 2020 max rate16 Oct 2020 max rate
CBAGoalSaver

1.15%

0.90%

0.50%

0.50%

WestpacLife

1.90%

1.65%

1.30%

0.75%

NABReward Saver

1.86%

1.61%

1.25%

0.80%

ANZProgress Saver

1.85%

1.60%

1.25%

0.70%

Average

1.69%

1.44%

1.08%

0.69%

Source: RateCity.com.au. Data accurate as at 19.10.2020.

Note: based on a balance of less than $50K. CBA has higher rates for higher balances. Rate cut was on 2 Oct 2019 by 25bps to 0.75

Highest conditional ongoing savings accounts

BankAccount16 Oct 2020 max rateConditions
UpSaver

1.60%

5 or more card purchases per month from your Everyday Account.
ME BankOnline Savings Account

1.55%

Tap & go four times a month. Balances up to $250,000.
Australian UnityActive Saver

1.50%

Deposit $250, no withdrawals each month.
INGSavings Maximiser

1.50%

Linked Orange Everyday bank account and deposit $1,000 or more per month and make 5+ card transactions each month.
MyState BankBonus Saver Account

1.50%

Eligible deposit of $20 into Bonus Saver account in the calendar month and 5 eligible Visa card purchases on linked Everyday or Glide account in the calendar month.

Source: RateCity.com.au. Data accurate as at 19.10.2020.

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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