Big four pass rate hikes onto savers

The big four banks are finally starting to pass on rising interest rates to savings customers — but there’s a catch.

The big four banks are finally starting to pass on rising interest rates to savings customers — but if you want a number with a five in front of it, you’ll have to go with a smaller institution.

The Reserve Bank this week hiked the official cash rate for the tenth consecutive month to a decade-high of 3.6 per cent, with NAB and Westpac on Thursday the first of the big four to pass on the full increase to borrowers.

Both banks also passed on the 25 basis points to a number of their savings products to 4.25 per cent.

RateCity analysis shows since the start of the tightening cycle nearly a year ago, the big banks have been selective in which savings accounts they hike, and by how much — some rates have gone up by more than the RBA prescribed, while others have hardly moved.

“The big four banks have pulled their socks up when it comes to passing on rate hikes to savers, although they’re not opening up their wallets to everyone,” said RateCity research director Sally Tindall.

“While some savings rates have risen by more than the RBA hikes, others are still trailing dismally behind.”

Some savings rates are ‘still trailing dismally behind’. Picture: iStock

Since May 2022, the stingiest banks in terms of passing on rate increases have been Westpac and ANZ — prior to Thursday, existing customers with online saver accounts only saw 80 basis-point increases, from 0.05 per cent to 0.85 per cent.

Bonus saver accounts at the big four have all largely tracked the RBA on the road to 4 per cent, except for ANZ’s Progress Saver, which went from 0.15 per cent to just 3.5 per cent.

Ms Tindall noted savings rates were determined on a “range of competing factors including the current cash rate, the bank’s appetite for new deposits, customer retention, profit margins and most recently, pressure from the government”.

“While the banks began lifting their game well before the idea of an ACCC inquiry was even floated, the month after this extra political pressure was applied, three of the big four banks passed on super-sized hikes to their bonus savings accounts,” she said.

The best savings rate currently available on the market is BOQ’s Future Saver account, only available for customers aged 14 to 35, which is offering a 5.15 per cent max rate on a $50,000 balance.

The Virgin Money Boost Saver is second, with a max rate of 4.85 per cent on a $250,000 balance.

Then there’s ING’s Savings Maximiser, which is offering 4.80 per cent on a $100,000 balance, and the Move Bank Growth Saver with 4.75 per cent on a $25,000 balance.

The Great Southern Bank Goal Saver is also offering 4.75 per cent on a $50,000 balance, but is only available for customers aged 18 to 24.

The next best is the Great Southern Bank Home Saver, available for all adults, which offers 4.65 per cent on a $100,000 balance.

NAB has announced interest rate changes. Picture: Carla Gottgens/Bloomberg via Getty Images

“If you’ve got your hard-earned money sitting in a savings account, don’t just assume your rate has risen in line with the RBA’s hikes,” Ms Tindall said.

“Check your rate and if it’s earning less than the cash rate then don’t take that lying down. Don’t get mad — get one up on your bank by walking down the road to a bank that’s willing to reward you for your business.”

NAB group executive of personal banking Rachel Slade said the bank was helping customers finding it tougher to get by, including those who might be facing financial challenges for the first time.

“We know most of our customers are in good shape but, for some Australians, financial difficulty might be an entirely new experience as rising costs put increased pressure on their finances,” she said.

“Our support is designed to get 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 per cent of them are back on their feet financially within three months.

As rates increase 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 chief executive of consumer and business banking, said for loan customers the bank understands after a number of successive interest rate rises some people are starting to cut back their spending to help balance the budget.

“We also realise there is a degree of uncertainty in the economic outlook and that is causing concern,” he said.

The RBA hiked rates for the tenth month in a row in March. Picture: William West/AFP

“To help customers manage their budgets we offer a range of tools in the Westpac app to track spending 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 customers are in a good position to absorb the impact of rising interest rates, we recognise cost of living pressures are challenging. We stand ready to support customers requesting hardship assistance at this time.”

ANZ, NAB and Westpac are all predicting that interest rates will peak at 4.1 per cent with rises to hit in March, April and May, while CommBank believes rates will only go as high as 3.85 per cent.

Russel Chesler, head of investments and capital markets at investment firm VanEck, said the case for two more rate rises is becoming weaker as the risk of an economic slowdown looms larger with each 0.25 per cent increase.

“The RBA has its eye on slowing economic data points and its hand hovering on the brake. We think there will be one more rate hike in April to 3.85 per cent before the central bank hits the pause button and holds rates at 3.85 per cent for some time to come,” he predicted.

“The winds are changing, in the past month we’ve seen consumer confidence plunge, softer GDP growth, monthly CPI missing estimates, wage growth below expectations and housing finance data remain low.

“While the consumer is still showing resilience in the face of mounting costs, we think from here hikes will hit harder as a large number of fixed mortgages roll off in coming months, and cost of living pressures really start to snowball.”

— with Sarah Sharples