Silver lining for some as banks raise savings rates

While rising interest rates are bad news for homeowners, those saving for a home deposit could see a silver lining — as long as they’re willing to jump through a few hoops.

Australia last week withstood its fourth consecutive interest rate hike, with the Reserve Bank of Australia (RBA) raising official rates by half a percentage point to 1.85%, well above from the all-time high of 0.1% during the COVID-19 pandemic.

While headlines often focus on the impact of cash rate increases on borrowers’ mortgage payments, an often overlooked beneficiary of higher rates are those with money in the bank, as financial institutions also begin to raise interest rates on savings accounts.

Following the RBA’s decision, banks have started to pass the higher rate on to savers, albeit slowly, as they tend to prioritize passing the increases on to their for-profit loan portfolio.

For customers of the big four banks – Commonwealth, NAB, ANZ and Westpac – this may be small comfort, as the going rates offered on basic savings accounts have previously been paltry to say the least.

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Data from RateCity shows that each bank is now offering an introductory rate, with 1.8% for five months available at CBA and Westpac, 1.8% for four months at NAB and 1.05% for three months at ANZ.

However, after this period, the current savings rate at CBA, NAB and Westpac drops to 0.85%, which is one percentage point below the cash rate. Interest on ANZ’s savings account drops to a meager 0.3%.

ANZ’s low rate for its daily saver may be because the bank is trying to entice customers to use its new ANZ Plus app, which offers an app-exclusive savings account with a rate of 2, 5%, the best on the market.