Savers receive fresh slap in the face as rate cut trend continues in 2021

2020 was a tough year for Australian savers. The financial impact of COVID-19 aside, three cuts to the official cash rate from the Reserve Bank helped further accelerate the ongoing decline in savings account rates.

Given that the cash rate now sits at a historic low of 0.10% you could be forgiven for thinking that the drop in savings rates would ease in 2021 though, but sadly for savers, that hasn’t been the case so far.

Since the start of the year there have been 34 cuts to at-call savings rates being tracked in the Mozo database, with the most recent reductions adding to a total of 202 savings rate cuts overall since the RBA’s November rate move.

The result? In the past 12 months the average ongoing savings account rate in our database has more than halved - dropping by a considerable 53 basis points from 0.97% to 0.43%.

Deposit safety still a pull factor

Among the banks to have cut savings rates so far in 2021 are three of the four major players: NAB reduced rates on its iSaver and Reward Saver accounts, Westpac trimmed rates on its Life and eSaver accounts, while the Commonwealth Bank made a reduction on its NetBank Saver.

As a result, the average ongoing big four savings rate is now just 0.19%, and the highest ongoing rates (available to all adults^) are as follow:

It turns out that interest rates might not be the number one priority for all savers though, especially in uncertain times.

New Mozo research has revealed that 52% of Australian savers believe that the major banks offer a safer option to store their money, while only 7% believe that it is more advantageous to bank with a smaller bank during the current economic climate.

While the demise of neobank Xinja in December may be weighing on some minds, Mozo Director, Kirsty Lamont, says that savers shouldn't forget about the Financial Claims Scheme which acts as a government-backed safeguard for Australian deposit customers.

“With the recent news of a neobank going under, it’s perhaps unsurprising that many savers are willing to forgo a better return on their money in exchange for the perceived security of the top end of town,” says Lamont.

“But when it comes to deposits under $250,000, the reality is your money is protected by the government deposit guarantee scheme. So failing to bank the extra interest you can earn through a smaller deposit taker doesn’t really add up.”

Online banks among the rate leaders

What about those savers who are searching for a more lucrative rate and are happy to deposit their savings in a non-major bank though?

Well when it comes to the savings accounts with the highest interest rates currently in the Mozo database, there’s plenty of choice - from large institutions like Macquarie and ME, to neobanks like 86 400 and Up.

As the table below shows, the Savings Maximiser account from online bank ING is certainly has the standout rate at present though, sitting well above our average ongoing rate of 0.44%. 

Highest ongoing savings account rates^ - Mozo database (February 1, 2021)

“As ever with personal finance products your best option is to compare all rates and move your money to where you can get the best value,” says Lamont.

RELATED: 5 easy savings tactics to try in 2021

Ready to find a more rewarding savings account to match your savings ambitions? Compare over 200 different accounts over at the Mozo savings account comparison hub, or check out some of the great offers in the table below.

 ^While the Westpac Life (18-29 years old) account currently offers the highest ongoing savings account rate in our database, it is only available to those aged between 18 and 29 years of age.