Savers hit by banks’ interest rate cut

By Mai Bantog
Banks have cut the interest rates on most of their short-term savings products by between 15 and 25 basis points.

They made the move early in September in an attempt to counter any impending RBA interest rate cut, even before the Board was set to announce any change in the interest rate.

The Board chose not to change rates, so this move translates to pure profits for the banks.

ANZ cut the rates of most of their term deposit offerings by 25 basis points, saying that the decision was made in order to “remain competitive.”

Other banks also did the same, with the all big four banks except Westpac cutting the rates by 15 to 25 basis points. Bankwest, Bendigo and Adelaide Bank, and Bank of Queensland also reduced their term deposit rates across some products.

The big four banks made an effort to offset their interest cut on short-term deposits by increasing their 8- to 36-month term deposit rates, in order to entice new customers.

One area where banks have worked to reduce interest rates is in online savings accounts, as their interest rates have shrunk by 25 basis points.

“While term deposit spreads remain elevated relative to early 2016 levels, the most recent movements in the short term space are encouraging,” said Deutsche Bank analyst Andrew Triggs.

“The greatest deterioration in term deposit spreads is in the longer-term categories which comprise a small proportion of the majors’ deposits.”