Commonwealth Bank cuts savings rate due to low interest rate pressures

Australia’s largest retail bank has slashed savings rates due to economic pressures caused by the coronavirus induced recession.

Savers have been dealt a financial blow, with the Commonwealth Bank slashing savings rates on deposit accounts.

Bowing to the economic pressures from the coronavirus pandemic, the country’s largest retail bank has carved five basis points off its standard and conditional savings accounts, including its kids savings product linked to the Dollarmites school banking program.

CBA has cut the five-month introductory rate on its standard NetBank Saver to 0.85 per cent, which then reverts to an ongoing rate of 0.05 per cent.

The bank’s conditional Goal Saver account now attracts a maximum rate of 0.85 per cent for balances over $50,000, while balance less than $50,000 have a rate of 0.5 per cent.

Its youth savings account now holds a maximum ongoing rate of 1 per cent. The bank has cut the applicable rate four times in the past six months.

The country’s largest retail bank has carved five basis points off its standard and conditional savings account. Picture: NCA NewsWire/Bianca De Marchi

CBA said it had regularly cut savings rates to cope with the financial pressures associated with the COVID-19 downturn.

Interest paid on saving accounts are an expense to the bank, with rates usually priced at levels where interest income from loans can offset the outflow.

“This unprecedented low-interest-rate environment does mean we regularly review our products and make changes to some of our deposit and savings interest rates,” a CBA spokeswoman said.

RateCity research director Sally Tindall said CBA’s move was in line with other banks, which are making pre-emptive cuts in response to rumours that the Reserve Bank of Australia will cut the official cash rate in November.

RateCity research director Sally Tindall says CBA’s move is line with other banks.

The RBA has flagged it is considering further monetary policy easing to help the Australian economy through its coronavirus recovery. Australia’s cash rate sits at 0.25 per cent.

“The banks appear to be doing a spring clean of their savings rates ahead of any official move from the RBA,” Ms Tindall said.

“If the RBA cuts the cash rate on Melbourne Cup day, it’s likely we’ll see savings rates sink even further. We could even see some banks cut their base rates down to zero.”

CBA said it had simplified the criteria for customers trying to attain bonus rates on conditional savings products.

National Australia Bank is offering a standard introductory savings rate of 0.85 per cent, while Westpac and ANZ are advertising rates of 0.75 per cent and 0.65 per cent respectively.

NAB’s highest conditional savings rate is 0.8 per cent, while Westpac’s Life deposit account has a rate of 0.75 per cent. ANZ’s Progress Saver is offering a maximum rate of 0.7 per cent.

According to RateCity’s database, the highest ongoing savings rate in Australia is being advertised by Up Bank at 1.6 per cent.