Given the Reserve Bank looks set to keep official interest rates on hold for another month, banks should be keeping savings account rates unchanged, right? Well, no, not if the majors are anything to go by.
Banks are cutting their savings rates in response to falling inflation and paused interest rates – but aren’t cutting mortgage rates at the same time, analysis shows.
Inflation is easing
The latest Consumer Price Index (CPI) figures released last week show the rampant inflation that has been plaguing the economy for the past year is slowing.
The CPI for the December 2023 quarter rose 4.1 per cent, which was a significant drop from the 7.8 per cent recorded 12 months earlier.
The figures indicate that the high prices we’ve been paying for most things will start to plateau, if not drop, through 2024.
To get inflation to this point, the Reserve Bank of Australia (RBA) used the only real tool at its disposal – lifting the official interest rate 13 times in 15 months between May 2022 and today.
Not surprisingly, banks were quick to pass on the rate increase to mortgage holders. But getting them to increase the rate for savers turned out to be like pulling teeth.
And now that this high-inflation period seems to be coming to an end, depositors are facing the reverse. Banks have been quick to drop their savings rates while leaving high mortgage rates on hold.
Savings rates reduced across big four banks
Analysis from Mozo shows savings rates for term deposits have gone down across all four major banks by at least 0.10 per cent or, in the case of Westpac, by 0.30 per cent.
Rates for a 12-month term deposit at ANZ and NAB were highest at 4.9 per cent per annum, while CommBank and Westpac are offering 4.8 per cent.
At the same time, mortgage rates across the big four have either remained unchanged, or in some cases, even increased.
Mozo also found Australian Unity reduced its Freedom Saver account rate to 5.20 per cent (from 5.5 per cent), MOVE Bank adjusted rates on its Online Saver and Growth Saver, and QBANK lowered its Bonus Saver rate by 25 basis points to 5 per cent.
Somewhat paradoxically, some banks have made both cuts and increases to their savings rates. It seems to be based on the length of the loans, with terms on shorter loans more likely to be cut.
Mozo found G&C Mutual Bank raised its nine-month and one-year rates by 20-35 basis points, but reduced its three-year rate by 40 basis points. Also, ING lowered its one-year rate by 30 basis points while making minor adjustments to other terms.
Judo Bank increased rates for the three- and six-month options in December and then reduced all terms by 5 to 15 basis points in January.
What can be done?
One year ago, Treasurer Jim Chalmers directed the Australian Competition and Consumer Commission (ACCC) to conduct an inquiry into ‘retail deposit products’ issued by deposit-taking institutions.
The ACCC published its report in December, finding the banks were not passing on interest rate drops and in some cases are making it more difficult for customers to switch products.
ACCC chair Gina Cass-Gottlieb says banks need to be more transparent about how they set interest rates. She says banks should be forced to keep customers informed about their best rates.
“Our report has recommended measures to make it easier for customers to get the most out of their savings and move to retail deposit products that better meet their needs,” she said.
“We are also recommending that banks alert their customers if they are about to lose entitlements to their bonus interest, for example by withdrawing too much or too often in a given month.”
Do you check that your savings are earning the best interest rate available? How often do you check? Let us know in the comments section below.
Also read: ‘Steady’ CPI should keep interest rates stable
It’s about time the Banks were Regulated again
They are Killing this Country and it’s People !
Banks should be regulated they have ripped off Australians for too many years, they do not service their customers instead expect their customers to use electronic banking, we need to use cash. The ACC need to investigate them they are making billions from their customers.