3.00% and falling: Saving pain continues, but this is why the savings account you choose still matters
As any Australian with money in a savings account will know, growing a balance has become more and more difficult over recent years thanks to steadily falling interest rates.
In fact, following the decision by RAMS to drop it’s Saver Account bonus rate from 3.00% to 2.80% last month, there are now no ongoing savings account interest rates in the Mozo database above 2.90%.
UBank’s USaver with Ultra Transaction Account now holds the crown for highest bonus savings account rate in the database at 2.87%, though savers are required to deposit at least $200 into the account or a linked Ultra Transaction Account every month in order to earn the bonus rate.
This is a far cry from even just a year ago when UBank’s offer ranked fifth highest in the Mozo database, with the likes of RAMS’ Saver account (now 2.80%) and AMP’s Bett3r Account (now 2.25%) both offering rates of 3.00% last October.
It’s not just the top of the market that has experienced falls though. Mozo data shows that the average ongoing savings account rate has fallen from 1.57% to 1.50% over the same period.
And according to Mozo Data Manager Peter Marshall, Aussies looking to grow their savings stash are unlikely to get rate relief anytime soon.
“I just don’t see any scope for savings account increases in the immediate future, especially given that the RBA has dampened prospects of a rise in the official cash rate for the time being,” he said.
“That said, in the absence of a fall in the cash rate I doubt that bonus rates will drop much further because banks have been using these accounts to attract new customers.”
Is it still worth comparing rates?
Whilst the drop in rates over the past year and beyond may bring a tear to the eyes of dedicated savers, Marshall still encouraged Australians to compare a range of options to ensure they’re getting a competitive rate of return on their savings.
“Even though the market-leading rates aren’t what they once were, there’s still enough of a difference between them and the lower end of the market to make a switch worthwhile for someone looking to grow their balance more,” he said.
“Just bear in mind that in order to earn a bonus rate on these accounts you’ll likely need to meet one or more minimum requirements like a minimum monthly deposit or a certain number of tap and go purchases using a linked debit card.”
So just how much could switching to a savings account with a better rate help boost your balance?
Jenny is a consistent saver, having already built up a balance of $10,000 by putting away $400 a month into her savings account which has an interest rate of 1.50%. According to the Mozo Savings Calculator, if she continued to make the same regular contributions Jenny would end up a with a balance of $35,685 after five years.
However, if Jenny made those same monthly contributions on a $10,000 starting balance into UBank’s USaver with Ultra Transaction Account which has a 2.87% interest rate (assuming she’s able to meet the minimum account requirements) she would end up with a balance of $37,315 after five years - or $1,630 more.
Ready to kickstart your savings by finding an account with a better rate? Get started today by comparing a range of offers using Mozo’s handy savings account comparison tables.