As expected, the Reserve Bank of Australia cut its cash rate to a new record low of 1.5 per cent on Tuesday following weak inflation data. But instead of passing the full interest rate reduction to its mortgage customers, Australia’s four major banks said that they will offer higher payouts on some term deposits for their savers who are no longer willing to stomach low returns on their cash.

Mortgage holders lost out this time, as variable mortgage rates were only reduced by 10 to 14 basis points while business costs are set to drop by 10 to 13 basis points. The banks’ choice to favour savers over borrowers complicates the transmission of RBA policy moves throughout the economy.

“Optically, the higher deposit rates look good from a saver’s perspective and banks need stable funding as well,” said Omkar Joshi, an investment analyst at Watermarks Funds Management. “Most of the margin sacrificed by the lenders will be largely compensated by decreasing rates on shorter-term term deposits and by not passing on the full RBA cut to mortgage customers.”

Westpac raised its rates on one, two, and three-year term deposits by 45 to 55 basis points, while CBA’s increases for similar products range from 50 to 55 basis points. ANZ plans to an increase of 60 to 75 basis points on its products, while NAB savers can also expect an increase of 85 basis points.

According to ANZ’s head of Australian business Fred Ohlsson, “Regulatory and funding costs have continued to rise and we need to remain attractive to depositors.”