Rate cuts boost national savings rate

But banks’ unfair rate practices dent savers’ returns

Falling interest rates are helping not hindering our national savings rate, according to a Nielsen poll of 1,500 Australians* commissioned by financial comparison website Mozo.com.au.

Six in ten Australians say that interest rate cuts have incentivised them to save harder than they were six months ago. Only one in ten say that falling savings rates have made them much less incentivised to save.

Rohan Gamble, managing director of Mozo.com.au, said, “Falling interest rates are putting a strain on savers’ returns, but instead of becoming discouraged to save, we’re actually saving harder than ever to make up for the shortfall.”

“While Australians should be commended for not being discouraged by falling returns, savers could be more affected by rate cuts than they realise. Our research shows that a number of financial institutions have cut savings rates by more than the Reserve Bank over the last six months.”

Mozo.com.au has analysed the track record of 17 major financial institutions and identified eight institutions that have cut rates on savings accounts by more than the Reserve Bank’s 3.0% since November 2008.

Bendigo Bank and Westpac are amongst the worst offenders to cut rates by more than the Reserve Bank, sending their best available savings rates plummeting to 1.75% and 2.90% respectively.

In better news for savers, the analysis also revealed that a handful of institutions have consistently cut rates by less than the Reserve Bank over the last six months.

RaboPlus and ING Direct have been kindest to savings customers, having cut rates by just 2.50% and 2.60% respectively to maintain consistently competitive savings products.

Mr Gamble said, “There are glaring differences in the way that financial institutions have passed on rate reductions to their savings customers over the last six months.

“As a result, many savers who had competitive rates when they first opened their account are now getting a dud deal.

“With interest rates settling down again after a period of sustained cuts, it’s an ideal time for savers to check their current rate against the best on the market to ensure they are still getting a good deal.”