RBA: NAB, Westpac Passes Rate Hike to Savings Accounts
The big four banks are finally starting to pass on rising interest rates to savings customers – but if you want a figure with a five, you’ll have to go to a smaller institution.
The Reserve Bank this week raised its official cash rate for a tenth consecutive month to a decade-high of 3.6 percent, with NAB and Westpac on Thursday the first of the big four to pass the full hike on to borrowers.
Both banks have also passed on the 25 basis points to a number of their savings products up to 4.25 percent.
Analysis from RateCity shows that since the beginning of the tightening cycle nearly a year ago, the big banks have been selective about which savings accounts they hike, and by how much — some rates have risen by more than the RBA prescribed, while others have barely changed.
“The big four banks have pulled their socks off when it comes to passing rate hikes on to depositors, even though they’re not opening their wallets to everyone,” said Sally Tindall, research director at RateCity.
“While some savings rates have risen more than the RBA increases, others are still lagging dismally.”
As of May 2022, Westpac and ANZ have been the stingiest banks in terms of passing on rate increases – until Thursday, existing customers with online savings accounts saw a rise of just 80 basis points, from 0.05 percent to 0.85 percent.
Bonus savings accounts in the big four have all largely followed the RBA’s path to 4 percent, except for ANZ’s Progress Saver, which went from 0.15 percent to just 3.5 percent.
Ms. Tindall noted that savings rates were determined based on a “set of competitive factors, including the current spot rate, the bank’s need for new deposits, customer retention, profit margins and, most recently, government pressure.”
“While banks began to lift their game long before the idea of an ACCC inquiry was even floated, three of the big four banks passed huge increases to their bonus savings accounts the month after this additional political pressure was applied,” said she. said.
The best savings rate currently available on the market is BOQ’s Future Saver account, available only to customers ages 14 to 35, which offers a maximum rate of 5.15 percent on a $50,000 balance.
The Virgin Money Boost Saver comes in second, with a maximum rate of 4.85 percent on a $250,000 balance.
Then there’s ING’s Savings Maximiser, which offers 4.80 percent on a $100,000 balance, and the Move Bank Growth Saver at 4.75 percent on a $25,000 balance.
The Great Southern Bank Goal Saver also offers 4.75 percent on a $50,000 balance, but it’s only available to customers ages 18 to 24.
The next best is the Great Southern Bank Home Saver, available to all adults, which offers 4.65 percent on a $100,000 balance.
“If you have your hard-earned money in a savings account, don’t assume that your interest has risen in line with the RBA increases,” Ms Tindall said.
“Check your rate and if it earns less than the cash rate, don’t pass it up. Don’t get mad – get one in your bank by walking down the road to a bank that is willing to reward you for your business.
Rachel Slade, director of the NAB personal banking group, said the bank helped customers who were finding it harder to make ends meet, including those facing financial challenges for the first time.
“We know that most of our clients are in good shape, but for some Australians financial difficulties can be a whole new experience as rising costs put greater strain on their finances,” she said.
“Our support is designed to help our customers through the tough times, and we know that when our customers reach out to our NAB Assist team early for help, more than 95 percent of them are financially back on their feet within three months .
As rates rise, so does the focus on savings and deposit products, so now is a great time to shop around and find the best rate and product features that work for you.
Chris de Bruin, Westpac’s CEO for consumer and corporate banking, said that for loan customers, the bank understands that after several consecutive interest rate hikes, some people start to cut their spending to balance the budget.
“We also realize that there is a certain amount of uncertainty in the economic outlook and that is cause for concern,” he said.
“To help customers manage their budget, we provide a range of tools in the Westpac app to track expenses and break down expenses. We also encourage customers to use our mortgage calculator to understand the impact of rising interest rates on their repayments.
While the majority of our clients are well positioned to absorb the impact of rising interest rates, we recognize that cost-of-living pressures are challenging. We stand ready to support customers requesting emergency assistance at this time.”
ANZ, NAB and Westpac all predict interest rates will peak at 4.1 percent with increases in March, April and May, while CommBank believes rates will only rise to 3.85 percent.
Russel Chesler, head of investments and capital markets at private equity firm VanEck, said the case for two more rate hikes is weakening as the risk of an economic slowdown grows with each 0.25 percent hike.
“The RBA has its eye on slowing economic data points and its hand is hovering on the brakes. We think there will be another rate hike to 3.85 percent in April before the central bank hits the pause button and keeps rates at 3.85 percent for a while longer,” he predicted.
“The winds are changing, over the past month we have seen consumer confidence decline, weaker GDP growth, missing monthly CPI estimates, wage growth below expectations and housing finance numbers remain low.
“While consumers continue to show resilience despite rising costs, we think the increases will hit harder from here as a large number of fixed mortgages mature in the coming months and cost-of-living pressures really start to snowball.”
— with Sarah Sharples