Savings account interest: Westpac joins ANZ by tweaking rates

Bonus savings accounts have long caused consumer confusion, and are stingy for many savers. Now they’re changing again.

Westpac customers should watch their savings accounts closely. Picture: John Gass

Big banks are doing their best to keep savers on their toes, making fresh tweaks to deposit accounts that further lower their base interest rates.

Westpac on Friday followed an ANZ move last week by lowering the base rate on one of its key savings accounts but increasing the bonus interest rate by the same amount.

Westpac’s Life savings accounts still have a maximum interest rate of 5 per cent, but have dropped the base rate from 2 per cent to 1.85 per cent, while lifting the bonus from 3 per cent to 3.15 per cent.

The bonus rate is only payable when the account receives at least one deposit per month and the balance is higher than the previous month. For 18-29 year olds the account’s maximum rate is 5.2 per cent.

Bonus savings account terms, conditions and introductory rates have been a controversial feature of bank deposits for many years, and mean consumers must continually shop around for the best rates.

And if they fail to meet the account’s conditions – such as minimum balances or no monthly withdrawals – their interest often gets slashed to below 2 per cent.

RateCity spokeswoman Laine Gordon said household savings hit a fresh record in July of $1.5 trillion, and 33 banks had cut at least one savings rate since January.

“When it comes to savings accounts, some of the biggest banks are battening down the hatches,” she said.

“The banks are getting smashed with ballooning deposit books. These cuts are designed to protect their profit margins. Banks will be trying to put a lid on how much interest they have to fork out.”

Savers also face the prospect of falling interest rates in the coming 12 months as central banks globally cut official interest rates as inflation moderates. The US Federal Reserve slashed its rate 0.5 per cent this week, although Australia’s Reserve Bank is expected to wait a few months before moving.

“It’s a grim outlook for Australians with savings in the bank, as they stare down the barrel of potential rate cuts next year,” Ms Gordon said. “There are still more than 60 banks offering ongoing savings rates above the monthly CPI indicator rate at 3.5 per cent. So if your hard-earned savings aren’t working hard enough for you, then consider switching to an account that will.”

Westpac has lowered the base interest rate on a key savings account. Picture: Christian Gilles

Canstar data insights director Sally Tindall said the maximum rate on bonus savings accounts was 5.55 per cent and the average rate was 4.63 per cent, while the highest term deposit rate on Canstar’s database was 5.1 per cent, from Australian Unity, but it was only for a six-month term.

Last week ANZ tweaked its Online Saver Account, increasing its three-month introductory rate by 0.1 per cent but cutting the ongoing rate by the same amount.

“As a result this account now offers 3.65 per cent for new customers for the first three months while existing customers are now on a hugely unappealing rate of just 1.40 per cent,” Ms Tindall said.

“If this is you, it’s time to move accounts.”

Originally published as Savings account interest: Westpac joins ANZ by tweaking rates