Banks show no interest in unconditional love for savers: Mozo
Last week the RBA hiked the cash rate target to 3.35%, taking the total increase since May 2022 to 3.25%. Analysis by financial comparison site mozo.com.au has revealed that banks have increased base saving rates by an average of 0.83%, while bonus saving rates and home loans have increased more in line with the RBA.
The finding comes as Treasurer Jim Chalmers announced he has flagged the minimal increases to deposit interest rates with the Australian Competition and Consumer Commission for investigation.
“Savers are being short-changed. Mortgage repayments keep on rising, but people are unable to lean on their savings accounts for support when it comes to finding the extra cash to put towards their rising repayments,” said Claire Frawley, Mozo Personal Finance Expert.
According to the Mozo database, since the first RBA rate hike in May 2022, standard variable home loan rates have increased by an average of 2.62%.
By comparison, base saving account rates have only increased by an average of 0.83%. Bonus saving accounts have seen more growth, increasing by an average of 2.61%.
“A handful of banks have boosted base savings accounts – but these competitive rates are few and far between. Instead, Aussies are being heavily steered towards bonus savings accounts but the conditions on these accounts are not achievable for everyone, especially those struggling with a tight cash flow,” Frawley said.
Common conditions on bonus saving accounts include meeting a minimum deposit, making a set number of transactions with a linked debit card, and growing the balance each month.
“When deciding on which type of savings account is best for them, people need to factor in the likelihood that they will meet conditional criteria every month. In some cases, a leading base savings account could actually see them cash in on more interest,” Frawley said.
For example, if a saver held a $10,000 balance in a leading bonus savings account with an interest rate of 4.80%, which reverted to a rate of 0.55% if conditions were not met, they would make up to $491 in interest over a year. However, if they only met the conditions for 6 out of 12 months, this would go down to $270 in interest. In this scenario, having an account with the leading base savings rate of 4.00% could be a better option, as they would still make up to $407 in interest.