Why savers are unlikely to gain much from RBA rate hikes


When Reserve Bank Governor Philip Lowe hiked the cash rate half a percentage point higher than expected on Tuesday, it came as an unpleasant shock to homebuyers as repayment increases wind down. profiled.

Westpac announced late Tuesday that it would pass on the entire rate hike to its floating rate customers and CBA, NAB and ANZ followed suit on Wednesday.

But savers are unlikely to see the interest paid on their deposits increase so rapidly.

Although banks are quick to cut deposit rates when the RBA cuts them, they are less likely to follow the central bank’s lead when it raises them.

“We don’t expect to see deposit rates increase much, which is disappointing,” said Sally Tindall, research director at consumer comparison site RateCity.

“The last time rates rose there was a lackluster response from banks on deposit rates, and I can only imagine we will see that again.”

And this time around, the banks have another reason to raise deposit rates even more slowly: they don’t need your money.

That’s because Australians pocketed hundreds of billions of dollars during the pandemic because they had fewer ways to spend their money.

The latest figures from regulator APRA show Australians have $1.27 trillion in their savings – an increase of $281 billion, or 22%, since the start of the pandemic.

“Banks are rife with cash right now, so raising deposit rates would be a very costly exercise for them – which they don’t really need. [to do]said Ms. Tindall.

Australia Institute chief economist Richard Denniss added: “Australia’s banks are among the most profitable in the world and they will keep deposit rates low to help them stay that way.”

Bank relocations

In response to the latest RBA rate hike, Westpac has been the most generous with its saving customers yet.

On Tuesday it raised the interest rate on its 12-month term deposits from 0.25% to 2.25% – a move Ms Tindall described as an “olive branch”.

But that’s still not a market-leading rate for these products. Ms Tindall said eight banks outside the big four offer 12-month rates higher than that.

Westpac and Bank of Queensland have some great deals on regular savings accounts though.

Westpac offers 2% on savings up to $30,000, while BOQ offers 3% on savings up to $50,000. But the catch is that customers can only access these fares if they are between the ages of 14 and 35 for BOQ, or 18 and 29 for Westpac.

Indeed, these banks are interested in winning over younger customers who could potentially take out a home loan with them in the future.

The Commonwealth Bank also raised some deposit rates. On Wednesday, it raised its youth savings rate by half a percentage point to 0.95% and raised its GoalSaver account – aimed at home savers – to 0.75%.

Fast on mortgages, slow on deposits

In May, when the RBA raised the official cash rate by a quarter of a percentage point, banks were quick to raise mortgage rates.

“After that, something like 97% of lenders increased their home loan rates. But three weeks later, only 75% of banks had raised their deposit rates,” said Steve Mickenbecker, chief commentator at Canstar.

“And those who have raised savings rates have done so by numbers like 21 to 23 basis points, rather than the 25 basis points of the RBA hike.”

But banks have taken a different approach to term deposits.

Inflation fears have pushed up bond market yields, which in turn are impacting fixed rate loans and term deposits.

“With six-month term deposits, the increase was 0.36 percentage points and over 12 months the average increase was 0.53 percentage points,” Mickenbecker said.

For two-year term deposits, the average rate rose 0.7 percentage points, according to Canstar research.


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