Yahoo Finance Interest rates: The banks offering the best savings rates and my guaranteed strategy to secure it
Some clever money managers are getting rates not seen in more than 15 years.
The fleeting 5.7 per cent interest rate that you could get on an instant-access savings account has gone.
And the rates you can get if you are prepared to lock away your money for a period of time have shrunk too.
But the cleverest money managers are getting these retro rates, not seen for more than 15 years. Here’s why, where and, crucially, how you can do even better than before with a 5.79 per cent interest rate.
Some banks are cutting before the RBA: Here’s why
Savings institutions, even if mutually owned rather than shareholder-owned, are profit institutions.
Their pricing and price tweaking are made with reference, not just to the Reserve Bank (RBA) but also to their costs and competitive pressures. So, when it comes to savings rates, institutions are all simply backing off the brawl for your deposit dollar.
The original online savings trailblazer, ING, which held the top-paying spot for most of last year, chose to give it up on the November rate rise. It ‘passed’ on passing on that rate rise to its Savings Maximiser account holders, choosing instead to direct extra interest to term deposits as 12-year-high rates caused a surge in demand.
Also by Nicole Pedersen-McKinnon:
This turned out to be a shrewd move. Now, expectations are that interest rates will be cut, and it took pressure off pricing.
It was Move Bank that offered 5.7 per cent for a short time but, this month, it cut its rate back to 5.5 per cent, equal with ING. The Target Saver offering from a number of institutions pays the same.
So, which savings account is best for you now will come down to the conditions on each.
Mozo has listed these in the table below.
Will you get extra if you give up access?
The question is whether you can get extra on term deposits. And the answer is ‘no’. You can see in this next table that the highest you can get is now 5.3 per cent, and only for one year.
Offerings have been slashed as interest-rate expectations have. However, if there is no chance of you clearing the hurdles of any of the bonus-saver-style accounts above, these term-deposit rates are still appealing.
Interest rates are expected to fall somewhat quickly and are expected to be significantly lower by mid-2025. For money you don’t need, it could be worth setting it aside in one of these.
However, it’s possible you could do even better.
How to make even more on your savings
If you have a mortgage, it is always better, from a mathematical and safety point of view, to put money alongside it instead of in a standalone savings account.
Mathematically, your savings should be identical to if you house it in an offset account. (Just check any offset account is 100 per cent and at the same interest rate as your mortgage.)
But mortgage interest rates today - even the best ones - start at 5.79 per cent (you can get this rate from Gateway Bank if your home has ‘green’ improvements or 5.94 per cent is on offer for everyone, from the rebranded Tic:Tic, now Tiimely).
Putting money in an offset account, therefore, saves at least 5.79 per cent. Any money you hold in one is netted off your loan balance, so you pay no interest on that amount, and this slashes your overall interest bill.
Not only is it a massive saving but, because it is not money you are earning, it is tax-free and it’ll put you ahead of your entire interest rate.
Even on those best 5.5 per cent deposit interest rates, a higher-rate taxpayer would only pocket just over half. And don’t miss that that is well below the current rate of inflation, 4.1 per cent.
Is it time to move your money?
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available atwww.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.
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