Big banks cut savings rates while you’re at the beach this summer
You may have enjoyed a quaint summer break relaxing by the beach, but some of Australia’s biggest banks were busy, cutting rates on savings accounts across December and January.
According to the Mozo database, ANZ was the first to cut rates before the new year with Commonwealth Bank, NAB and Westpac all following suit in January leaving the base rates on offer from the big four dwindling well below 1%.
Meanwhile, in an effort to offset the cuts, Commonwealth Bank, NAB and ANZ all bumped up their introductory offers meaning headline rates remained relatively unchanged.
Base rate vs. introductory rate
Understanding the difference between the base rate and introductory rate on savings accounts is key for customers shopping around for the best deal.
The base rate describes the interest rate you’re guaranteed to earn over the life of your deposit while the introductory rate - often far more attractive - may only last for a few months, and these two numbers average out to form a headline rate that providers are able to advertise.
Mozo Director Kirsty Lamont believes that while the raft of cuts to base rates over the summer may not seem significant, Aussie savers will notice the difference over the long term.
“Three major banks are employing bait and switch tactics by jacking up introductory offers, while hacking away at base rates. Unlike the bank’s advertised rates, base rates tend to fly under the radar but this is where savers feel the most impact,” said Lamont.
This is because the “bait and switch” tactic relies on a degree of customer inertia.
“The onus is on savers to move their cash out after the introductory period expires or be punished by these miserly rates,” she said.
Still hope for savers
In December Mozo reported that the average ongoing interest rate had fallen by nine basis points over 2017, so it should come as no surprise to hear that savings rates are in decline.
With the downward trend continuing in 2018, how can Aussies make the most of their savings accounts? Mozo’s Product Data Manager, Peter Marshall believes the secret is to constantly compare a variety of accounts currently on the market.
“Savers shouldn’t become complacent, because the variety of rates out there means there are still opportunities to switch to a provider which could secure you a better return on your savings,” said Marshall.
And these opportunities do exist. According to Mozo’s Savings Calculator, an Aussie saver with $10,000 deposited at the average interest rate in the Mozo database (1.81%) and contributing a further $100 per week would accrue $987 in interest over a three year period.
Comparatively, the same saver depositing their money in the market-leading AMP Bett3r Save Account - currently at 3.00% - would accrue $1,661 in interest (providing conditions are met).
It isn’t just AMP that are offering a great rate on savings accounts, however. To discover a host of other providers head to Mozo’s savings account comparison tables or check out the longer list of providers offering top ongoing rates below.
6 ongoing bonus rates to supercharge your savings
3.00% - AMP Bett3r Save Account - Minimum deposit of $2,000 per month into linked Bett3r Pay Account from an external source.
2.95% - ME Online Savings Account - Ongoing bonus rate if during the month you make a weekly Tap & Go purchase with your ME Everyday Transaction Account buck Debit Mastercard.
2.87% - UBank USaver with Ultra Transaction Account - Bonus interest only applies on funds held in linked USaver account if $200 deposited into either account in the previous month from an external source and the combined balance is less than $200,000.
2.80% - Australian Unity Active Saver - Minimum deposit of $250 and no withdrawals in the month
2.80% - ING Savings Maximiser - For customers who have an Orange Everyday and deposit at least $1,000 from an external bank account each month (and from 1 March 2018, 5 card purchases per month)
2.80% - RAMS Saver Account - Minimum deposit of $200 and no withdrawals in the month
*All figures and rates correct at the time of writing.