Your savings in 2020: Death by a thousand rate cuts

Interest rates on savings accounts and term deposits have plummeted in recent years. That won’t come as any surprise to the country’s long-suffering savers, but the sheer number of cuts that have been passed down by banks in the last six months might.

Since March 1, 2020, the Mozo database has recorded 1,736 interest rate cuts to bank accounts, savings accounts and term deposits. Here’s the breakdown:

• 257 cuts to bank accounts

• 635 cuts to savings accounts

• 844 cuts to term deposits

Now fair enough, a lot of Aussies probably don’t pay attention to whether or not their bank account balance is earning any interest at all, but it still means there have been 1,479 cuts to savings accounts and term deposits in just six months.

Those numbers don’t even include kids or business accounts.

As the graph above shows, the most significant flurry of cuts took place in March and April, which makes sense because it’s the period directly after back-to-back RBA rate cuts. It’s also true that the size of these cuts vary greatly - many were quite small, while others larger.

But most of all, they’ve been unrelenting.

And the actual impact hasn’t been insignificant. For example, since March 1, the average ongoing savings account interest rate in the Mozo database has fallen by 34 basis points to 0.63%.

As Mozo Director Kirsty Lamont says, these cuts have also meant that the nation’s savers have missed out on well over $1 billion in interest.

“As mortgage holders enjoy record low-interest rates, it’s no secret that the banks need to find other ways to remain profitable - and taking from Australian savings accounts is an easy way to ensure the books stay nice and plump,” she says. “By hacking away at the interest rate over the last six months, Australian savers lost out on approximately $1.6 billion.”

Steady cuts bring more pain for major bank savers

Let’s be clear, you’ll struggle to find a savings account or term deposit interest rate which hasn’t been cut in the past six months. In other words, this trend isn’t unique to the big four.

What is important to remember is that, according to APRA’s latest Authorised Deposit-taking Institution Statistics from June, 74% of total household deposits are held with ANZ, the Commonwealth Bank, NAB and Westpac.

In other words, the savings rates offered by the major banks affect a lot of Australians.

As the graph shows, if you’ve got your savings parked with one of the big four you’ll be getting a rate somewhere between 1.00% and 0.40%. And that’s if you meet the account conditions, because if you don’t you're looking at a base rate between 0.01% and 0.45%.

The exception here is the Westpac Life (18-29 years old) account which currently comes equipped with a 3.00% maximum rate on balances up to $30,000, though there are a few conditions that need to be met.

Not all is lost for savers though.

While rates have been drifting further and further down, there is still a considerable difference between the lower offers on the market, the average rate and the highest offers. 

For instance, ING’s Savings Maximiser (1.65%) and MyState Bank’s Bonus Saver Account 1.65%) both offer ongoing savings rates which are currently 100 basis points higher than the Mozo average.

Meanwhile Judo Bank is offering term deposit rates well above the Mozo average - as high as 1.55% for a 3 year term. 

RELATED: Term deposits snapshot: Interest rate cuts predicted to slow down in September

Ready to find a more rewarding home for your savings? Check out some of the great offers in the table below, or start comparing even more of the latest rates using Mozo’s dedicated savings account comparison table.