Savers are having to jump through hoops to get the full benefit of interest rate rises as the country’s major banks keep their base rates unchanged, even after the Reserve Bank’s recent moves.
While the big four banks were quick to raise interest rates for home loan borrowers after the RBA lifted the nation’s official interest rate from 3.85 per cent to 4.1 per cent last month, they have not moved “base” rates on bonus savings accounts.
This means customers with bonus savers, who don’t meet the required conditions, have not seen their rates rise in line with the RBA’s move.
Analysis from Canstar shows all four big banks fully passed on the latest RBA rate hike to the maximum rate on their bonus saver accounts: products that require customers to meet certain criteria every month, such as growing their balance, to unlock the highest possible interest rate.
However, all four banks have not lifted their base rates: the interest rate that customers get when they don’t meet the bank’s conditions each month. About 40 per cent of Australian savers miss out on getting the bonus rate every month because they do not meet all the conditions, Canstar has found.
In 2024, the Labor government said it would work with banks to help improve how customers are notified about bonus interest rate offers and when an introductory lower-interest rate period ends, including through the potential development of industry standards. However, there has been no change yet.
Canstar director of data insights Sally Tindall said the selective pass-through of rate hikes has been common in recent years.
“Time and time again, banks pass on rate hikes in full to bonus rates but not base rates, and customers often miss out entirely,” she said, noting the big banks in particular have not needed to fight as hard because they have been “flush with cash” and customers have not tended to put pressure on the banks by looking to switch accounts in search of the best deal.
Canstar’s research shows that during the round of rate hikes across 2022 and 2023, the total rate on bonus saver accounts increased by an average of 4.05 percentage points, while base rates rose by an average of just 0.42 percentage points.
Macquarie analysts also noted the trend in a recent note, saying banks had continued to “largely, but not fully, pass through rate hikes to deposit customers,” and adding this was positive for net interest margins (banks’ funding costs compared with what they charge for loans).
“Banks have only partially passed the RBA hike onto retail savings customers, leaving base rates largely untouched,” Macquarie analysts said.
However, Tindall said there was now some competitive momentum growing among smaller banks with Judo Bank announcing a new savings account with an interest rate of 5.35 per cent, eclipsing that of ING, which has led the market for some time, and Great Southern Bank offering a term deposit rate of 5.5 per cent for a five-year term.
Macquarie, an investment behemoth that has been looking to challenge the big four banks by increasing its share of Australian deposits over the past few years, has also competed fiercely against the big four with simpler savings account products. It now holds about 7 per cent of Australia’s $1.7 trillion in household deposits.
“AMP is set to pip Macquarie at the post to offer the new highest ‘no strings attached’ savings rate,” Tindall said, referring to ongoing interest rates customers can get on their deposits without having to meet conditions every month. “What this means is competition in the savings sector has dialled up a notch – fantastic news for proactive savers.”
Canstar data showed the big four had generally raised rates by a larger amount on standard savings accounts, which do not pay bonus interest.
However, the big four’s ongoing rates on these standard savings accounts, excluding introductory rates, which only last a number of months, were all under 2 per cent.
Tindall noted the “devil is in the details” when it comes to stronger competition with customers needing to read the fine print to get the best deal.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.