As the Reserve Bank meets today to decide on the cash rate, those who hold mortgages are hoping for a cut, but the news for those relying on savings to generate an income, is only getting worse.
In February, we had the first rate cut of the year of 25 basis points, which saw the cash rate fall to a record low of 2.25 per cent. This was also the first rate cut since August 2013, yet the interest rate paid on savings has fallen much further.
According to Ratecity.com.au, the major banks have dropped between 65 and 88 basis points from ‘bonus’ online saving rates in the last year. The big four banks have cut their rates as follows:
- NAB – 88 basis points to 3.05 per cent
- Westpac – 86 basis points to 2.95 per cent
- Comm Bank – 71 basis points to 3.2 per cent
- ANZ – 65 basis points to 3.16 per cent
Term deposits have also been hit hard, with RBA figures showing that rates paid on a one-year term deposit fell by 65 basis points in the last six months and three-year term deposits fell by 90 basis points.
With economists predicting a 70 per cent chance of a cut to the cash rate when the RBA meets today, savers will be watching keenly to see how the banks react.
To see how a different interest rate can affect your savings, use the compound interest calculator at Moneysmart.gov.au
For a comparison of the interest rates on offer for savings accounts, use a comparison site such as Ratecity.com.au
