Times have been tough over the past two years for borrowers with the RBA raising the cash rate to 4.35%, but for savers it hasn’t all been bad news. During the pandemic, when the RBA lowered the cash rate to .1%, savers were essentially going backwards once inflation was taken into account, but as the cash rate has risen over the past two years, so has the interest rate on savings accounts—with some of the best deals now starting well above 5%.
However, some banks have been slower to pass these rate rises onto the $1.4 trillion in national savings accounts, while passing them immediately onto borrowers with home loans. Last year, the ACCC investigated how Australia’s lenders set rates for loans and deposits, and the federal government has acted on its recommendations with a suite of proposed measures to make it easier for consumers to understand financial products and when there is a better deal on an interest rate.
Part of the government’s new measures will involve forcing banks to issue notifications for interest rate changes on savings and transaction accounts so customers understand the terms of their introductory rate period and, crucially, when it ends or the rate changes. As the ACCC’s Retail Deposits Inquiry uncovered, some 79% of Australians have a savings account of some kind but the large majority of these accounts—71%—did not accrue any bonus interest through the first six months of 2023.
“Despite the importance of transaction accounts, savings accounts and term deposits, the ongoing challenges consumers face in searching for, comparing, and switching between products means that consumer engagement with the market for retail deposit products is relatively low,” the report noted.
“This low level of engagement means many consumers miss out on earning more from their savings.”
That is why it’s important to do your research periodically to determine whether you’re meeting the conditions to accrue interest and whether more suitable—and higher paying—options have become available. Consider setting a date in your calendar every three to six months to review your savings account and others on the market.
