RBA rate cut: What it means for your savings

Posted: 4 June 2019 2:31 pm
News

Australian notes and coins on table.

Australians could soon be earning even less interest on their savings with the RBA today cutting the official cash rate to 1.25% after more than 30 months of no movement.

Australian's are already earning record-low interest rates on their savings accounts and term deposits, but they could get even lower following the RBA rate cut today. After over 30 months of keeping the official cash rate on hold at 1.50%, the RBA has today cut the rate to 1.25% following months of speculation and uncertainty.

The official cash rate is used by banks and lenders to help guide their own interest rates offered on deposit products like savings accounts and term deposits as well as mortgage rates for home buyers borrowing money. However, the RBA's cash rate is merely a guide, and many banks have been dropping their interest rates on deposit products over the past few years despite no change in the official cash rate since August 2016.

Good news for home owners, bad news for savers.

The RBA cash rate is mostly discussed with mortgage rates in mind. It's widely expected that a lot of lenders will follow the RBA and cut interest rates on their variable rate home loans offered to consumers. It's a win for home owners if lenders pass on the full 25 basis point cut, as it means it'll reduce the amount of interest owing on their home loan.

However, the cash rate will also impact the interest you earn on your savings account. And, while the RBA rate cut is likely good news for home owners , it isn't as good for savers. If the banks were to follow the RBA and cut their interest rates offered on deposit product by 25 basis points, that means savers will be earning less interest on their money.

Term deposit rates have started to drop already.

We've already seen a number of financial institutions lower their term deposit rates over the past couple of months in anticipation of today's rate cut, and savers can expect to see more cuts in the following days and weeks. However, unlike changes to mortgage rates, changes to interest rates on savings products can often fly under the radar.

CommBank has gradually dropped the interest rate on its five year term deposit from 2.40% p.a. in April to 1.80% p.a. now. Similarly, AMP has gradually reduced the interest rate on its 12 month term deposit from 2.55% p.a. in March this year to just 2.04% p.a. now.

Savings account interest rates are a bit less grim than term deposits, with a few providers still offering upwards of 2.80% p.a.

Not happy with your rate? Instantly compare high interest savings accounts today

Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees
Virgin Money Boost Saver (25+ year olds)
1.5%
0.1%
1.4%
$0
Intro rate of up to 1.50% p.a. for the first 3 months and an ongoing bonus rate of 1.20% p.a. thereafter when monthly criteria is met (T&Cs apply). To earn these bonus rates customers aged 25+ need to deposit at least $2,000/month into your bundled Virgin Money Go Transaction Account and make 5+ transactions/month.
Rabobank High Interest Savings Account
1.35%
0.25%
1.1%
$0
Maximum variable rate of 1.35% p.a. for 4 months, reverting to a rate of 0.25% p.a. No deposit or withdrawal conditions. Available on balances below $250,000
Westpac Life (18-29 year olds only)
2.5%
0.15%
2.35%
$0
If you’re between 18-29, you can earn a 2.5% p.a. variable rate each month you grow your balance (excl. interest) and make 5+ settled debit card purchases from your Westpac Choice account, up to a balance of $30,000.
Bank of Queensland Fast Track Starter Account (for 14-24 year olds only)
2.5%
0.05%
2.45%
$0
Only available to those aged 14-24. Ongoing, variable 2.5% p.a. when you link to an BOQ Day2Day Plus Account, deposit $200+ into the Day2Day account each month from an external account and make 5 eligible transactions a month. Max bonus interest applies on balances up to $10,000. Balances between $10,001 and $250,000 will earn a lower bonus rate. Base rate applies on balances over $250,000.
Citibank Online Saver
1.1%
0.35%
0.75%
$0
Introductory rate of 1.1% p.a. for 4 months, reverting to a rate of 0.35% p.a. Available on balances Up to $500,000.
Virgin Money Boost Saver (18-24 year olds)
1.5%
0.1%
1.4%
$0
Intro rate of up to 1.50% p.a. for the first 3 months and an ongoing bonus rate of 1.20% p.a. thereafter when monthly criteria is met (T&Cs apply). To earn these bonus rates customers aged 18-24 need to deposit at least $1,000/month into your bundled Virgin Money Go Transaction Account and make 5+ transactions/month.
Bank of Queensland Fast Track Saver Account
1.05%
0.05%
1%
$0
Ongoing, variable 1.05% p.a. when you link to an BOQ Day2Day Plus Account, deposit $1,000+ into the Day2Day account each month from an external account and make 5+ eligible transactions per month. Available on balances up to $250,000.
Virgin Money Grow Saver
0.65%
0.1%
0.55%
$0
Earn an ongoing variable 0.65% p.a. each month you make at least one deposit of any amount and no more than one withdrawal.
Westpac Life
0.3%
0.15%
0.15%
$0
Ongoing, variable 0.3% p.a. each month you deposit money, and make sure your balance is higher at the end of the month than it was at the beginning. No monthly account-keeping fee.
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