Cuts to savings rates have cost retirees and young savers $1.6 billion in just six months, new research has found.
Banks had cut the average savings rate to 0.65 per cent as of August 2020 – down from 1.15 per cent the same time last year – as they scrambled to cover the costs of a home loan price war.
Research from consumer comparison site Mozo found Australian financial institutions have made 1736 cuts across all savings products since March 1.
Term deposit accounts faced the majority of cuts (844), while savings accounts were slashed 635 times.
The remaining 257 cuts applied to bank accounts.
Mozo director Kirsty Lamont said the cuts meant savers have missed out on $1.6 billion in interest payments.
“As mortgage holders enjoy record low-interest rates, it’s no secret that the banks need to find other ways to remain profitable,” she said.
“Taking from Australian savings accounts is an easy way to ensure the books stay nice and plump.”
The average savings rate across the Big Four banks has fallen from 0.57 per cent to 0.32 per cent since March 1.
These banks are used by 80 per cent of Australians, but Ms Lamont said their rates are less competitive than those of smaller rivals.
Westpac is the only exception, but there’s a catch.
The bank is offering a 3 per cent rate on its Life accounts, but only to customers aged 18 to 29.
Beyond that offer, Big Four bank customers can expect to receive an ongoing savings rate between 0.4 per cent and 1 per cent.
Serious savers should instead look to smaller banks, including community banks and digital-only neo-banks.
“The best ongoing rates are currently 1.75 per cent with Australian Unity,” Ms Lamont said.
“You could also nab a competitive intro rate of 2.20 per cent with Heritage Bank.
“As far as term deposits, Judo Bank is offering a 1.30 per cent rate, which is the best 12-month term on the market.”