Interest rates rising on savings accounts and term deposits

Cash in the bank has become more alluring as banks increase interest rates, but many savers still miss out on money.

People with cash in the bank are increasing their winnings from Australia’s sticky high inflation, as banks step up their interest rate increases for savings accounts and term deposits.

Despite no Reserve Bank interest rate rises in more than seven months, many more banks have been lifting deposit rates compared with those cutting their offerings.

However, finance specialists say Australians still sell themselves short when it comes to getting a good deposit interest rate.

Research group Canstar monitors moves in interest rates, and it has reported in the past month that there have been deposit rate rises by 31 providers, while just six have cut at least one rate.

Canstar group executive financial services Steve Mickenbecker said banks were trying to attract more deposits from households amid higher wholesale funding costs, so they were making their products more attractive.

Savers are being urged to check their interest rates. Picture: iStock

Mr Mickenbecker said this week’s higher-than-expected inflation figures were likely to keep deposit rates higher for longer.

“Interest rate policy is a two-speed thing,” he said.

“It hits people who haven’t had mortgages for that long the hardest, but all the savers out there and retirees living off term deposits start to do a lot better.”

Average deposit rates were inching up and people should check how their accounts compared, Mr Mickenbecker said.

“The best rate for a regular account is 5.2 per cent but the average is still only 2.69 per cent,” he said.

“You don’t want to be leaving the bank with 2.5 per cent of your money – you want to be the one earning that.”

Bonus savings accounts offer the highest interest rates but these come with conditions such as no withdrawals or minimum deposits each month.

“The trick is people have to make sure they will qualify every single month for the conditions – if they don’t, they will get virtually zero interest,” Mr Mickenbecker said.

Savers also could check and switch between introductory rates that might last for three or four months, but beware when the high rate ran out “you will be back to a very ordinary rate”, he said.

Canstar’s Steve Mickenbecker. Picture: Supplied

RateCity’s Sally Tindall. Picture: Tim Hunter.

RateCity research director Sally Tindall said there had been several savings account moves recently, most notably NAB-owned Ubank’s announcement to increase its Save product’s maximum bonus interest rate to 5.5 per cent from July 1.

“This puts pressure on the market leaders,” she said.

“Three banks offer ongoing rates of 5.5 per cent – it highlights the competition in the market for deposits.”

Financial markets suggest the chance of a Reserve Bank rate rise this year is nearing 50-50, a big jump from earlier this week, before a surprise annual jump in inflation to 4 per cent was unveiled in CPI figures.

However, some savers are still missing out.

“Not every single saver is reaping the benefits of a high-rate environment, because banks are still picking and choosing which accounts have competitive rates,” Ms Tindall said.

For example, Westpac’s eSaver account offered a 4.65 per cent introductory rate for five months for new customers, but after that intro period its standard variable rate was just 1.1 per cent, she said.

Savers should look for rates with a “5” in front of them, understand terms and conditions of accounts and diarise the end of high introductory periods for accounts, Ms Tindall said.

Originally published as Interest rates rising on savings accounts and term deposits