Westpac makes ‘grim’ interest rate change for savers: ‘Getting smashed’

Westpac has lowered the base rate of its Life savings account, while increasing the bonus rate by the same amount. (Source: Getty)

Westpac has joined ANZ in cutting the base rate of its popular online savings account. The moves come ahead of the Reserve Bank of Australia’s (RBA) meeting next week, with the central bank expected to keep interest rates on hold at their current 12-year high.

Westpac has lowered the base rate of its Life account by 0.15 per cent to 1.85 per cent today, while hiking the bonus rate by the same 0.15 per cent to 3.15 per cent. The maximum rate will remain at 5 per cent.

The change means savers will get a lower rate if they aren’t able to meet the account’s monthly conditions. They are required to grow their balance each month and make a deposit to earn the bonus rate.

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ANZ also adjusted rates on its Online Saver account last week, marking the first change by a Big Four bank since the RBA hiked the cash rate in November last year.

The major bank similarly lowered the base rate by 0.10 per cent to 1.40 per cent, while hiking the three-month introductory rate by 0.10 per cent to 2.25 per cent. This kept the total rate at 3.65 per cent.

RateCity money editor Laine Gordon said the major banks were “getting smashed with ballooning deposit books” and these adjustments were aimed at protecting their profit margins.

“Latest APRA data shows Australians have a record $1.50 trillion in household deposits in July. Banks will be trying to put a lid on how much interest they have to fork out,” Gordon said.

“It’s a grim outlook for Australians with savings in the bank, as they stare down the barrel of potential rate cuts next year.”

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More savings changes to come

Mozo personal finance expert Rachel Wastell said savings rates typically stayed stable until we got closer to an RBA rate cut, or one occurred.

With the Commonwealth Bank predicting the first interest rate cut could come as soon as December, Wastell said savers should be prepared for more changes in the “near future".

“Once the RBA cuts, there will likely be a number of banks cutting savings rates in response, so banks with less competitive rates may hold off on cuts until that first RBA cut comes through,” she told Yahoo Finance.

“Aussies with their savings in a leading online savings account should be checking their rate to see if it's moved, especially as we could see more rate leaders shifting rates down as we get closer to an RBA cut.

“Bonus rates can be attractive if you meet the conditions needed to secure the high interest rate, but with changes happening to the base rates on savings accounts - the rate your savings account will revert to if you don’t meet those conditions - savers need to be vigilant."

It comes after all of the Big Four banks made cuts to their term deposit rates as banks look to avoid being “locked into paying higher rates for longer periods”.

Top 5 ongoing savings accounts

Here are the top 5 ongoing savings rates right now, including those with bonus conditions:

1. ME HomeME Savings Account: 5.5 per cent when you deposit $2,000 and grow balance

2. MOVE Bank Growth Saver: 5.5 per cent when you deposit $200 and make no withdrawals

3. ING Savings Maximiser: 5.5 per cent when you deposit $1,000, grow your balance and make 5 card purchases with linked account

4. Ubank High Interest Save Account: 5.5 per cent when you deposit $500

5. Rabobank Premium Saver: 5.45 per cent when you grow balance by $200 a month

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