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RBA cash rate rise: Will you get a higher rate on your savings?

Posted: 5 May 2022 11:10 am

After staying at a record low of 0.10% since November 2020, the Reserve Bank of Australia (RBA) has increased the cash rate by 0.25 percentage points to 0.35%. This is the first time the rate has risen since November 2010.

Which banks are raising savings rates?

Westpac - 0.25% - Westpac Life, Westpac 55+ and Retired accounts

NAB - 0.25% - Reward Saver bonus rate

ANZ - 0.25% - Progress Saver

Suncorp - 0.40% - 12-month term deposit

What have banks done so far?

The Big Four banks were quick to make interest rate changes for their home loan products.

And 3 of the Big Four have announced changes to their savings rates. Westpac and NAB were first off the mark to increase their interest rates for certain deposit accounts. ANZ followed the day after the rate change.

At Westpac, interest rates have increased by 0.25 percentage points for its Westpac Life and Westpac 55+ and Retired savings accounts.

At NAB, the bank's reward saver bonus interest rate has increased by 0.25 percentage points in line with the RBA decision.

ANZ has also announced it is increasing its Progress Saver bonus interest rate by 0.25 percentage points. From Friday 13 May, ANZ customers with a Progress Saver account will get a total rate of 0.40% inclusive of the bonus rate.

Increasing its savings interest rate above the cash rate, Suncorp has also announced a change. The bank's 12-month term deposit rates will increase by 0.40 percentage points to 1.40%, effective from 18 May.

Other banks may follow suit in the next few weeks, but there's no guarantee that every bank will pass on the rate rise to their customers.

What we can learn from the past

In the past, savings rates have actually been higher than the national cash rate, but generally moving up and down in line with the cash rate. In 2016 when the cash rate began its almost 3-year hold at 1.50%, the average savings interest rate began dropping without any change from the RBA.

In the time that the RBA held at 1.50%, the savings rate dropped 8 times. In August 2016 the average savings rate was 1.65% and by the time the RBA eventually cut rates in June 2019, the average savings rate was 0.60%.

While the cash rate has been at record lows of 0.10%, the average savings interest rate has been just 0.05%.

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