Savers hit as banks cut rates on term deposits

A spate of banks including Commonwealth and Macquarie have hit savers and retirees with cuts to term deposit rates.

CBA and Macquarie are among banks cutting interest rates on a range of term deposit products.

A spate of banks including Commonwealth and Macquarie have hit savers and retirees with cuts to term deposit rates, following the central bank’s benchmark rate declining to a new record low.

CBA and Macquarie were among those alerting their customers to changes yesterday after the Reserve Bank cut the cash rate by 25 basis points to 1.25 per cent at its June meeting.

Fierce debate was triggered by the cut this week when Westpac and ANZ didn’t pass on the entire reduction to home loan customers, with the latter’s chief Shayne Elliott saying the bank wanted to look out for its deposit holders.

CBA is cutting interest rates on a range of term deposit products by 10 to 25 basis points, after agreeing on Tuesday to pass on the RBA cut in full to its variable rate borrowers.

“We regularly review our product offerings and have made some changes to our term deposit interest rates to reflect the record low interest rate environment,” a bank spokeswoman said.

“We believe our deposit products continue to provide value to our customers.”

Macquarie has flagged a decrease in interest rates across a range of products including transaction and savings accounts, cash management products and at-call investment accounts.

Bendigo and Adelaide Bank has reduced rates for at-call deposits by an average of seven basis points and also made changes to term deposits. An AMP spokeswoman said it was reducing “most deposit interest rates” by 25 basis points and some term deposits by five basis points.

Savers and retirees were reeling this week as they anticipated a dip in interest earned on funds that are not already locked into term deposits.

For 12-month term deposits of $50,000, financial comparison group Canstar’s analysis now shows the highest market rate at 2.7 per cent at Arab Bank, Qudos Bank and Teachers Mutual.

At the bottom end are Bank of Sydney and HSBC with 12-month term deposit rates of 1.8 per cent.

Term deposits are more closely linked to the bank bill swap rate, while the pricing of savings accounts typically align with the official cash rate.

That explains why RateCity analysis counted more than 50 banks — including ANZ and Westpac — that had cut term ­deposit rates in the past two months.

For online savings accounts, where the funds are more readily available, MyState Bank and MOVE Bank (formerly Railways Credit Union) come out on top with an annual rate of 2.2 per cent.

The big four banks are huddled at the bottom of the pile at 0.5 per cent, alongside Holiday Coast Credit Union and Endeavour Mutual Bank.

Canstar said despite the major banks often having attractive introductory offers for online accounts, it was increasingly difficult to cut already low rates.

“They are going to be at a point where it is very hard to wind those down further,” Canstar’s financial services executive Steve Mickenbecker said. He said that if the RBA pulled the trigger on another rate reduction it would “squeeze bank margins”.

To dull some of the backlash ANZ confronted this week, the bank announced a new 11-month term deposit rate of 2.35 per cent. That was 25 basis points higher than its prior best rate in the market of 2.1 per cent for four months and 80 basis points up on where the same term deposit was previously.

Lenders also continued to reduce mortgage rates on Friday. AMP cut its rates by 25 basis points while Bendigo Bank said it would decrease variable rates by 20 basis points for principal and interest loan customers.

Interest-only loans at Bendigo Bank dropped by 15 basis points.