Not much reward for saving

SAVINGS interest rates are being savaged, leaving deposit holders with little or no returns on money parked in the bank.

While mortgage holders have revelled in the record-low interest rate environment, savers have been continually hit by dismal offerings.

New analysis by financial comparison website Mozo found 10 banks have already cut “at-call” savings rates this financial year.

Their database shows there are now only four providers in the market offering ongoing savings rates of 3 per cent or more, with most deals falling under the 2 per cent mark.

Mozo spokeswoman Kirsty Lamont said it remained a tough challenge for deposit holders to get any decent returns on their savings and urged consumers to review the rates on their savings and shop around.

“A lot of the nation’s savers would be assuming because the cash rate hasn’t moved for over a year now that neither has their savings rate but that’s obviously not the case,’’ she said.

“It’s time for savers to check the interest rate they are currently receiving and if it is under 2 per cent it’s time to get out there and shop around for a better rate.”

Data from Mozo confirms that the average ongoing savings rate has dropped from 2.05 per cent to 1.82 per cent in the last year.

Ms Lamont also blamed the nation’s cooling housing market for reducing the need for banks to raise deposits to fund new loans, which has consequently resulted in even less competitive savings interest rates.

Consumer finance expert Lisa Montgomery said mortgage customers are much better off parking excess cash in a home loan offset account to reduce their monthly interest charges instead of keeping money in a cash savings account.

“If you have a mortgage you can make a lot more money by putting it in an offset account rather than putting it into a savings account,’’ she said.

“You are not making interest but you are reducing your interest bill.”

Consumers should also beware that many savings accounts come with terms and conditions which the customer must meet to get the highest interest rate available, for example by depositing a certain amount of cash into the account each month.