Australia’s big four banks have moved one step closer towards zero-interest savings accounts, with the lowest base rate on offer now sitting at just 0.11 per cent.
ANZ and NAB were the first of the big four banks to deliver a blow to savers in the wake of the RBA’s most recent rate cut on July 2. The former cut its Online Saver base rate to 0.15 per cent on Friday, and the latter dropped its iSaver base rate to 0.11 per cent.
It’s only a matter of time before CBA and Westpac follow suit, according to Canstar financial services group executive Steve Mickenbecker. But smaller lenders are still providing far more competitive offerings.
“The average online savings account base rate is still a lot higher than the 0.11 and 0.15 per cent that the big banks are offering,” Mr Mickenbecker said.
“The average online savings account base rate was 1.13 per cent two days ago, and the highest was 2 per cent.
“But others are going to follow [ANZ and NAB] – there’s no question of that.”
Mr Mickenbecker told The New Daily that it had been a “tough old ride” for savers in recent years, with most banks cutting interest rates on savings accounts more than rates on home loans.
Canstar figures show that in September 2016 (just after the RBA cut the official cash rate to 1.5 per cent), the standard variable home loan rate was 2.92 per cent above the online savings account rate.
But after the two recent RBA rate cuts, that margin has now jumped to 3.46 per cent.
Finder insights manager Graham Cooke said some of the biggest cuts to savings accounts occurred between August 2016 and May 2019 – during which time the RBA held the official cash rate at a steady 1.5 per cent.
“While the cash rate was stuck at 1.5 per cent, savings interest fell from 1.65 per cent in August 2016 to only 0.85 per cent in May 2019,” Mr Cooke said.
“This drop happened because banks shifted their interest payments to bonus savings accounts, which tend to offer a better rate for customers who save every month but don’t withdraw.”
The future doesn’t look particularly bright for savers, either.
With the Federal Reserve looking likely to cut interest rates, and the Australian economy continuing to register anaemic growth, most economists are predicting that the RBA will cut the official cash rate at least once more before the end of the year.
But with interest rates on savings accounts already creeping towards zero, RateCity.com.au research director Sally Tindall says another RBA rate cut would leave banks in a difficult bind.
“Banks are juggling the competing interests of shareholders, depositors and borrowers. Any further cuts to the cash rate will make this a near impossible equation to solve,” she said.
“If rates are cut again, it could force some savers to look beyond their bank to get more bang for buck.
“Putting cash into your super account, the share market or possibly even peer to peer lending might become a more attractive option for people looking to get bigger returns on their investments.”