Banks mute on deposits
FINANCIAL institutions were quick to announce drops to mortgage interest rates this month but have remained silent while cutting savings account rates.
While home loan customers are enjoying interest rate falls, those stashing cash are being hit with decreases to interest rates on their deposits.
Research by comparison website InfoChoice has found at least 25 online savings accounts have been hit with rate drops since the Reserve Bank of Australia’s surprise decision to cut the cash rate to 2.75 per cent this month.
Several institutions have dropped their interest rates on savings accounts by as much as 50 basis points despite the cash rate falling by 25 basis points.
InfoChoice general manager Alastair Schirmer says institutions are managing to get around lower rates by offering attractive introductory deals.
‘‘ What we’ve seen is the introduction of a lot of ‘‘ intro rates’’, so they’ll have a base online savings rate and then they’ll have a strong introduction rate,’’ he says.
‘‘ That’s how they are driving more people through.’’
He says the interest rate cuts have been ‘‘ flowing through’’ over the past 12 months as the cash rates continues to fall, but higher introductory rates have helped bolster the average online savings interest rate.
The data shows in the past 12 months the average online savings account interest rate has fallen by 82 basis points from 4.44 per cent to 3.62 per cent, while the cash rate has fallen by 100 basis points since June last year.
Term deposit interest rates have fallen slightly more than online at-call savings accounts – the average rate falling by 84 basis points to 3.91 per cent over the past year.
AMP financial planner Dianne Charman says the rate falls are a ‘‘ double-edged sword’’ and deposits holders would be wise to shop around.
Charman suggests that people with large amounts of cash to ‘‘ re-evaluate.’’
‘‘ Retirees need to sit down with their adviser, if they have one, and work out what this means to their cash flow rates,’’ she says.