NAB, AMP and Citi have become the latest big banks to quietly reduce the amount of interest paid to savers already struggling with record low interest rates.
The interest rate for NAB’s Reward Saver account has been cut from 2.7 per cent to 2.55 per cent, while Citi’s Online Saver has been reduced from 3 per cent to 2.85 per cent. AMP’s Notice Account has been cut from 2.2 per cent to 2.15 per cent.
All three made the changes last week. “Recently we’ve seen several banks drop their savings and term deposit rates in an attempt to maximise their profit margins,” said Bessie Hassan, money expert at comparison website Finder.com.au.
“This may be correlated to the record profit banks are reporting at the moment. With speculation about a rising cash rate, and potentially rising mortgage rates, it’s been relatively quiet on the savings front. Banks may be dropping savings rates without causing much of a stir.”
According to Finder, term deposit rates have also been creeping downwards. Bankwest has cut its term deposit rates on some products by up to 30 basis points, while NAB has slashed its rates by up to 50 basis points.
Ms Hassan said returns for Australian savers were becoming less attractive, so it was important to shop around for a good rate on your savings account.
“Some banks are also offering sweeteners such as cashback offers and high into rates, to lure new customers,” she said. Make sure you meet the deposit requirements so you’re eligible to earn the maximum variable rate, including the bonus interest.
“Alternatively, savers may want to consider a term deposit account which may offer a slightly more competitive rate.”
The currently average maximum savings account rate is 2.62 per cent based on a $5000 balance, but some online banks offer 3 per cent or more. Among the big four, the average rate on $5000, five-year term deposit is 2.77 per cent.
It comes after figures from the Reserve Bank last month showed for the first time since 2014, interest paid on savings accounts fell below the official inflation rate, meaning many Australians with cash in the bank are now losing money in real terms.
According to the RBA, the average interest rates paid by the banks on online savings accounts fell by 0.05 basis points to 1.25 per cent in December — below the annual inflation rate of 1.3 per cent.
The last time that happened was in June 2014, when inflation briefly spiked to 3 per cent.
The RBA has kept the official cash rate on hold at its historic low of 1.5 per cent after two 25 basis point cuts last year. The low interest-rate environment is good news for borrowers with mortgages or personal loans, but bad news for savers.
According to financial comparison website Canstar, there were 13 cuts to savings account interest rates in December and 16 cuts in November, compared with just three increases in the same two-month period.
ANZ and Westpac each cut rates on their online savings accounts by 0.2 basis points in December, although ANZ had temporarily raised its rate by 0.1 points in the previous month. NAB and CommBank each cut their rates by 0.1 basis points in November.