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Major banks slammed as Aussies told to ‘switch now’

Logos of the big four banks and Australian money.
The major banks have been called out for not hiking deposit rates as quickly as mortgage rates. (Source: Getty)

Reserve Bank of Australia (RBA) governor Philip Lowe has told Aussies not to be afraid to switch banks if they don’t like their mortgage or savings rate.

Speaking at a House of Representatives committee hearing today, Lowe was asked about the speed with which Australia’s major banks - CBA, ANZ, NAB and Westpac - pass on savings rates to customers when the central bank hikes the official cash rate.

“The banks certainly are fast to lift mortgage rates and are slower at passing on better deposit rates,” Lowe said.

“The banks need to do better.”

Australian households, together, hold more than $1.3 trillion in savings and deposit accounts.

“If you have got your savings in the bank and you are only earning 0.2 per cent and you can earn 4.2 per cent, you should switch it and earn the 4.2 per cent,” Lowe said.

“There are some great rates out there and if Australians start switching … the banks will have to respond.”

ACCC inquiry into deposit rates

Lowe’s comments come after the Australian Competition and Consumer Commission (ACCC) announced it was launching an inquiry into how banks set interest rates for savers.

“We are aware that deposit and savings accounts are an important source of income for many Australians, typically supplementing their income from employment, superannuation and the pension,” ACCC chair Gina Cass-Gottlieb said.

The cash rate target set by the RBA has increased from 0.1 per cent to 3.35 per cent and, in most cases, banks have fully passed through the cash rate target increases to their home loan interest rates.

However, the increases in interest rates on deposit products appear to have typically been smaller and less consistent. In many cases, banks have only applied increases in the cash rate to some of their deposit products.

“We will also examine the extent to which consumers can benefit from shopping around and switching, and what other barriers are stopping consumers from seeking a better return on their savings,” Cass-Gottlieb said.

Best savings rates

Top savings accounts, according to data.

A chart from Canstar demonstrating the highest savings account rates.
A chart from Canstar demonstrating the highest savings account rates.

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