Banks hit savers with further interest rate cuts

ANZ’s move to cut interest rates for savers may be an attempt to get in ahead of any coming RBA cut.

ANZ is cutting rates for savers. Picture: Supplied

ANZ has cut its fixed term deposit rates by up to 25 basis points in a move that some say is designed to pre-empt another reserve Bank interest rate cut, which may come as early as next month.

ANZ reduced all standard term deposits by 25 basis points, with a 12-month deposit now giving a return of 0.55 per cent.

Interest rates on advance notice term deposits have been reduced by between 0.2 and 0.25 percentage points, resulting in a new 12-month deposit return rate at 1.05 per cent.

RateCity research director Sally Tindall said term deposit cuts usually a signal that banks are expecting the RBA to cut interest rates again.

“Term deposit rates are fixed rates, and as a result, changes are often implemented in advance of a potential RBA cut,” Ms Tindall said.

“Today’s cuts to term deposits from ANZ could be a sign there’s another rate cut coming as early as next month.”

The changes to fixed deposits comes after savings rate reductions made following the RBA’s most recent decision to cut the official interest rate by 25 basis points to 0.5 per cent.

Meanwhile, Commonwealth Bank also hit savers again on Wednesday, slashing its NetBank Saver introductory five month rate by 0.35 percentage points - more than the RBA’s cut to official rate - to now offer savers 1.3 per cent. On the same savings product, the bank has reduced a further 5 basis points off the ongoing rate, which now stands at 0.05 per cent. CBA had previously cut 25 basis points from its Goal Saver and pension savings products, and slugged youth savers with a 0.3 percentage point reduction.

Ms Tindall said cuts are making deposit accounts little more than a “safe place” to store funds.

“Someone with $20,000 in one of these accounts would be getting just $10 in interest over a year,” she said.

“That’s not much more than few loaves of bread after a full 12 months of saving.”

While headline and introductory rates are feeling the squeeze on returns, Ms Tindall said the low rate environment was making it nearly impossible for banks to pass any further cuts on to base rates, which are already lower than 0.1 per cent.

“When the RBA cuts the cash rate, banks typically adjust both their home loan and savings rates by roughly the same amount to try and maintain their net interest margin,” Ms Tindall said.

“The problem is, in this low rate environment, many of the banks’ ongoing savings rates are already within 0.25 per cent of zero, which makes it near impossible to pass rate cuts in full to all savings customers.”

ANZ, NAB and Westpac are yet to cut savings rates, but have cut rates on savings deposits earlier in the year.