Savers dealt a blow as NAB cuts rates to 1 per cent on conditional deposit accounts

Savers dealt a blow as NAB trims savings rates on nest eggs

Savers continue to be slugged by the low interest rate environment.

Savers have been dealt another blow as banks continue to further shave the interest-accruing potential of nest egg accounts.

NAB has trimmed the headline rate on its Reward Saver accounts by 25 basis points, bringing its conditional savings account to a maximum return of 1 per cent.

The conditional savings product now attracts a base savings rate of 0.05 per cent, with an additional bonus rate of 0.95 per cent, if the conditions of one monthly deposit and no withdrawals are met.

NAB is the latest big four bank to cut savings rates, following the Reserve Bank’s COVID-19 response in March, which included a 25 basis point carving to the official cash rate and quantitative easing measures.

Commonwealth Bank and ANZ had already reduced rates applicable to conditional deposit accounts.

CBA slashed its Goal Saver by 35 basis points on April 3, with the account now attracting a maximum savings rate of 0.5 per cent.

ANZ cut its Progress Saver account just after Easter, which now advertises a peak rate of 1 per cent if all conditions are fulfilled.

On April 14, NAB shaved 25 basis points off its standard savings account, bringing its four month introductory rate to 1 per cent.

Westpac is the only major bank to not move on rates, with both its standard and conditional deposit accounts attracting maximum rates of 1.3 per cent.

“It’s now a waiting game to see if Westpac will follow suit and shave their savings rates,” RateCity research director Sally Tindall said.

Banks traditionally cut savings rates in an attempt to offset the losses incurred from having to reduce rates on lending products, such as home loans.

The low interest rate environment is placing downward pressure on the credit spreads of financial incumbents, as interest income from loan portfolios continues to shrink, due to lower fixed and variable lending rates.

However, Ms Tindall said banks were running out of room to cut on savings rates, which was prompting significant trimming of bonus rates that were above and beyond the RBA’s moves.

“Most base savings rates are already just above zero, however some banks could resort to cutting their bonus rates again in a bid to help balance the books,” Ms Tindall said.

Last month, CBA pruned 35 basis points of the youth saver account synonymous with its Dollarmites school banking program.

Ms Tindall noted further savings cuts could be ruled out, especially after the RBA said the cash rate will not rise until the economy begins moving towards full employment.

“When you consider the damage caused by the coronavirus to date, and the damage still to come, it’s hard to see any RBA movement north in the foreseeable future,” she said.

In the past 12 months, major banks have cut standard savings rates by 121 to 150 basis points, while conditional deposit accounts at the big four have fallen between 100 and 140 basis points.

According to RateCity, Macquarie Bank’s standard savings account is currently leading the market, attracting a four month introductory rate of 2.65 per cent and an ongoing rate of 1.35 per cent.

Tasmania’s MyState Bank is currently offering the highest conditional savings rate, with a maximum annual return of 2 per cent, if all conditions are met.

“The outlook for savers is bleak but there are still relatively decent rates to be found if you look for them,” Ms Tindall said.

“Some banks such as ING and Bank of Queensland have also waived some of their eligibility criteria to qualify for perks such as bonus interest.”