Three of the country’s big banks have cut interest rates paid to many customers with savings accounts in the past month as lenders try to protect their profit margins.
In a move likely to save banks money but attract little public attention, both Westpac and ANZ Bank lowered the “base” rates they pay on online savings accounts during May, while increasing short-term “introductory” rates by the same amount.
The changes mean the advertised rates for these products are unchanged, even though long-term customers will receive lower rates of interest on their money.
Base rates refer to interest rates that are paid to all customers with this type of account, whereas “introductory” rates are only paid for between three and five months, as a way for banks to attract new business.
Meanwhile, Commonwealth Bank also cut the rates it pays on its bonus savings accounts by 0.1 percentage points for balances of up to $50,000 during May, while lifting rates on higher balances.
The cuts come as new figures from financial comparison site Mozo show all of the big four banks have cut interest for online savings accounts by more than the 0.5 percentage point reduction in official interest rates over the past year.
RBA figures show that, across the industry, average rates paid on online savings and bonus savings accounts are at record lows.
Head of data at Mozo, Peter Marshall, said cutting “base” rates but not the advertised headline rates was an effective way for banks to preserve their interest revenue without drawing attention to the fact that longer-term savers would be paid less.
“They can still look as competitive as they did in the past, while reducing the amount of interest that they are paying out for some savers,” Mr Marshall said.
Mr Marshall said it was just one type of change banks could make across various products if they were to try to offset the banking tax introduced in this year’s budget. Banks have not ruled out passing on the levy to customers, but say they are not yet seeking to do so.
Mozo figures show Westpac and the Commonwealth Bank have lowered base rates on online savings accounts by 0.75 percentage points in the past year, ANZ has cut its base rate by 0.8 percentage points, and NAB lowered its base rate by 0.6 percentage points.
ANZ this week cut its base rate by 0.15 percentage points to 1 per cent, but increased its introductory rate, which is paid for three months, by the same amount. This left the headline rate used to market the product unchanged.
An ANZ spokesman confirmed the change, adding: “The headline rate of 2.55 per cent per annum is the equal-highest rate of the major banks for a product of this kind and our base rate remains highly competitive.”
Westpac made a similar move, lowering its base rate by 0.05 percentage points to 1 per cent, but keeping the headline rate unchanged at 2.51 per cent. Its introductory rate is paid for five months.
“We constantly review our rates to ensure we continue to offer competitive rates to customers and balance the needs of our various stakeholders,” a Westpac spokeswoman said.
CBA’s 0.1 percentage point cut for balances below $50,000 is different to the cuts at ANZ and Westpac in that it applies to bonus savings accounts, which require customers to make a minimum monthly deposit, and no withdrawals.
A CBA spokeswoman said the bank had also increased the maximum level at which savers could earn bonus interest from $100,000 to $1 million.
“Regular savers can now earn competitive interest rates of 1.70 per cent to 1.90 per cent, depending on their balances,” she said.
“Our interest rates reflect a number of factors including local and international funding markets, regulatory requirements and competitive conditions and we frequently review our products to ensure they reflect market conditions.”