Australians old and young have missed out on about $1.6 billion in just the past six months, due to bank cuts to interest rates on savings products.
As of August 2020, the average savings rate was cut from 1.15 per cent at the same time last year to 0.65 per cent. Aussie banks and financial institutions have made 1736 cuts across all savings products since 1 March 2020.
Term deposit holders were the biggest losers, with term deposit products copping a total of 844 cuts. Savings account rates were cut 635 times in the same time, and the remaining 257 cuts applied to bank accounts.
The average savings rate across the Big Four banks fell from 0.57 per cent to 0.32 per cent in the past six months.
The cuts, mostly made to cover the costs of a home loan price war, meant that 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,” said money expert Kirsty Lamont.
“Taking from Australian savings accounts is an easy way to ensure the books stay nice and plump.”
Despite big bank rates being less competitive than those of smaller rivals, they are still the favoured financial institutions for around 80 per cent of Australians.
With the exception of Westpac, the ongoing savings rate offered by the Big Four is between 0.4 per cent and 1 per cent
Westpac offers a three per cent rate on its Life accounts, but only to customers aged 18 to 29.
Ms Lamont says savers should look to smaller banks, such as community banks and neo-banks, for more competitive rates.
“The best ongoing rates are currently 1.75 per cent with Australian Unity,” she 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.”
Have you considered switching banks? Have you investigated neo-banks for better returns?
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