Deposit rates crater

Via Banking Day:

At-call and term deposit rates continued to fall last month, in what comparison site Mozo called “a significant retreat”.

AMP made some of the biggest cuts, reducing the six-month introductory rate on its Saver account by 70 basis points to 1.5 per cent and the ongoing bonus rate on its Bett3r account by 25 bps to 1 per cent.

Macquarie Bank no longer offers the highest introductory rate, after dropping the four-month introductory rate on its Savings account by 26 bps to 2 per cent.

According to Mozo, the top intro rate is 2.25 per cent, which Rabobank is offering for four months (before dropping back to a base rate of 80 bps).

Curve Securities chief executive Andrew Murray says measures such as the Reserve Bank’s term funding facility, combined with strong growth in deposits, have created a high level of liquidity in the cash market and pushed cash market rates down to around 13 or 14 bps.

The low level of cash market rates and the bank bill swap rate are contributing to low borrowing costs for households and businesses, as intended by the Reserve Bank, and also lower deposit rates.

In a speech to the Economics Society of Australia at the end of June, Reserve Bank deputy governor Guy Debelle said: “The market expectation is that the cash rate will remain around its current level of 13 to 14 bps for at least the next year.”

Debelle went on to say: “As a result of the RBA’s recent policy actions, there has been a substantial increase in system liquidity. This has lowered the cost of funding for the banking system.”

In other changes, NAB cut the introductory rate on its iSaver account by 10 bps to 90 bps (the base rate is 5 bps) and its cut the bonus rate on Reward Saver by 10 bps to 85 bps. NAB also cut a number of its term deposit rates.

Commonwealth Bank cut the rate on its GoalSaver account by 5 bps and cut rates on a range of term deposits by up to 20 bps.

Westpac and its subsidiaries cut up to 15 bps on a range of term deposits. Westpac’s highest TD rate is 90 bs for two, three, four and five years.

ING cut the bonus rate on Savings Maximiser by 15 bps to 1.55 per cent. The base rate remains unchanged at 10 bps. To earn the total rate of 1.65 per cent rate customers must deposit a minimum of $1000 a month and make at least five purchases on their ING debt card.

ING has cut the bonus rate on Savings Maximiser by 30 bs this year.

ME cut 25 bps off the ongoing rate for its Online Savings account, which is now 1.55 per cent.

Neobank Xinja cut the ongoing rate on its Stash savings account by 15 bps to 1.65 per cent. The account is closed to new business.

The top ongoing savings rates in the market are being offered by Volt, whose Save account rate is 1.65 per cent, Macquarie Bank (1.35 per cent) MOVE Bank (1.1 per cent), AMP Bank (1 per cent) and CUA (1 per cent).

The highest introductory rate is 1.25 per cent, which Rabobank is offering for four months. Westpac has a 3 per cent savings rate available for 18 to 29 year olds for balances up to $30,000.

Mozo said that 70 of the 86 TD providers tracked in its database cut at least some of their TD rates last month. Since the start of the year the average rate for each term is down by between 43 and 62 bps.

The highest TD rate is Judo Bank’s offer of 1.65 per cent for five years. Judo is offering the highest rates for all term from one to five years, as well as the top nine-month rate of 1.42 per cent.

David Llewellyn-Smith
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