Interest rates sink as savers suffer

INTEREST rates for cash deposits are flatlining at record low levels despite home loan rate rises, prompting frustrated savers to turn their backs on cash in the bank.

Bank deposits are growing at their slowest pace in more than a quarter of a century as customers realise the effects of inflation mean their cash returns are going backwards.

And fresh data shows that banks’ eagerness to increase rates for mortgage borrowers does not extend to savers.

The latest Reserve Bank figures show that retail term deposit rates average 1.95 per cent, bonus saver accounts are paying 2.05 per cent and online savings accounts just 0.85 per cent – halving in the past two years.

RateCity.com.au has found that in the past three months 54 per cent of home loan providers increased mortgage rates but only 15 per cent of banks increased savings account rates.

“Savers are probably feeling a little bit lost right now, particularly as the prospect of the next rate rises has all but fallen off the horizon,” said RateCity research director Sally Tindall.

Record high household debt was another reason why Australians were drifting away from savings accounts, she said.