Savers hit by paltry rates close to zero per cent
Savers are getting hit by rock-bottom interest rates close to zero per cent by keeping their cash in the bank.
Banking
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Savers have been dudded a massive $1.6 billion in interest returns as banks continue to slash savings accounts rates across about 1500 products.
Some of the nation’s largest banks are offering paltry returns as low as 0.05 per cent on cash deposits, giving savers good reason to park their cash elsewhere.
The Reserve Bank of Australia board kept the cash rate on hold on Tuesday at 0.25 per cent but new analysis by financial services firm Mozo showed many savings accounts rates interest are close to zero per cent.
Just last week the nation’s largest bank – the Commonwealth Bank – dropped their special introductory rate on their popular Netbank Saver account by 0.05 basis points to just 0.9 per cent.
This is the honeymoon rate for the first five months before it plummets to 0.05 per cent.
Mozo’s spokeswoman Kirsty Lamont said banks had continued to “trimmed rates over a long period of time”.
“Savers have missed out in $1.6 billion in interest over the past six months but many savers won’t have noticed because they are dropping by very small amounts,” she said.
“It’s a wake up call for savers to take the time to check the rates they are earning because they may be very surprised to see them drop to a level they weren’t aware of.”
Many banks offering higher introductory rates for a set period before they fall significantly once the honeymoon period ends.
The $1.6 billion in lost interest is based on the average ongoing savings rates falling from 0.97 per cent to 0.65 per cent in the past six months and this is then applied to the nation’s $1.03 trillion in household deposits.
Australian Bureau of Statistics data released this week showed in the June quarter housing savings to income ratio rose from 6 per cent to 19.8 per cent.
Ms Lamont said despite low rates being good news for those paying down debts including home loans, it continued to hit hard those who rely on saving returns including retirees.
Tribeca Financial’s chief executive officer Ryan Watson said savers could be better off looking at other places to tuck away their money and watch it grow.
“Putting your money in the bank at these deposit rates is a waste of time,” he said.
“Some alternate ways to make your money work harder for you are increasing you investment risk with a portion of your savings, paying down short term debt, ie. credit cards and personal loans.”
Mr Watson said for mortgage customers it would be more financially beneficial to make additional repayments or contribute extra money into superannuation savings.