Does your savings account seem a little lacklustre lately? You’re not alone, as RateCity research reports that 46 banks have cut savings account rates in the last month.
Australian savers continue to bear the brunt of low interest rates, with rate cuts continuing to come out-of-cycle to the Reserve Bank of Australia’s (RBA) cash rate. This includes cuts from banks big and small, such as CommBank, NAB, ING, St George, AMP and Suncorp.
Typically, banks and lenders will amend their non-fixed interest rates based on the cash rate, as set by the RBA. Put simply, when the RBA cuts the cash rate, interest rates typically follow downward. When it hikes the cash rate, banks increase rates. Low rates lead to happy borrowers with home loans, or those looking to take out a personal loan. But it also means low interest rates and lower returns on savings products, like term deposits and savings accounts.
The RBA have kept the cash rate on hold at 0.25 per cent since it made an emergency cut in mid-March, in response to the coronavirus pandemic and its immediate impacts on the Australian economy.
However, RateCity research has found that more than 90 savings accounts have had their rates cut in the last month alone.
How much have savings rates dropped in the last year?
RateCity Research has found that for big four bank customers, these savings account cuts have been significant.
A year ago, the average big four bank ongoing saving rate was 1.77 per cent. Now, it is just 0.81 per cent. This is a difference of 0.96 per cent in a year, however, the cash rate has only dropped by 0.75 per cent during this time.
Realistically, what this may mean for your nest egg is that you are potentially not getting as high of a return as you should.
Big four bank ongoing savings rates - then and now
|Bank||Account||Aug 2019 Max rate||Aug 2020 max rate||Difference|
|Big four bank average||1.77%||0.81%||-0.96%|
Source: RateCity.com.au. Note: based on a balance of less than $50K. CBA has higher rates for higher balances. Data accurate as of 10.08.2020.
All hope is not lost however, as there are some competitive ongoing savings rates still sitting above 1.50 per cent available from competitor banks for those willing to make the switch.
Keep in mind that it’s important you do your research around what conditions you may need to meet on a new savings account before you switch. For example, ensure that your budget suits any minimum deposit criteria, or that you won’t be penalised for withdrawals if you’re the type of person who dips into their savings.
Highest ongoing savings rates
|Bank||Max rate||Conditions for max rate|
|Australian Unity||1.75%||Deposit $250+ per month and make no withdrawals.|
|Bank of Queensland||1.65%||Deposit $250+ per month and make 5 purchases in linked account.|
|ING||1.65%||Deposit pay of $1,000+ and make 5+ card transactions per month|
|MyState Bank||1.65%||Deposit $20+ per month and make 5+ purchases in linked account.|
Source: RateCity.com.au. Note: Excludes accounts with age restrictions. Data accurate as of 10.08.2020.
Some of the highest ongoing rates for young Australians
|Bank||Account||Max rate||Conditions for max rate|
|Westpac||Life||3.00%||Balance needs to be higher every month, plus 5 purchases with linked account. For balances up to $30K|
|Bank of Queensland||Fast Track Starter||2.50%||Deposit $200+ into your linked account and make 5+ purchases per month. For balances up to $10K|
Source: RateCity. Note: Data accurate as of 10.08.2020.