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Why savings rates will increase within weeks

Are you about to get more back from your savings? Source: Getty
Are you about to get more back from your savings? Source: Getty

Australia’s savers could soon get a better deal as some lenders begin to increase term deposit interest rates.

Suncorp and Summerland Credit Union have increased their longer term deposit rates this week, with Mozo rates expert Peter Marshall noting that more rate increases are on their way over the next six months.

“It looks like there might finally be some good news for the nation’s savers, as authorised deposit-taking institutions (ADIs) adjust to the world without the RBA’s cheap credit,” Marshall said.

Why are lenders increasing rates?

The Reserve Bank of Australia (RBA) in March 2020 announced it would provide lenders with low cost three-year funding to promote more lending and provide cheaper credit through a term funding (TFF) facility.

The TFF essentially meant banks could access large amounts of funding at ultra low rates, which would then be paid back over three years. It had $90 billion in available funding at its induction with a three-year fixed rate of 0.25 per cent that would end in March 2021.

However, it was extended in September to include another $200 billion of funding available to lenders until the end of June 2021. When the RBA cut interest rates to 0.10 per cent in November, it also pulled the TFF interest rate down to 0.10 per cent.

Now, with only weeks left of the TFF, lenders are preparing to increase interest rates for both borrowers and savers.

“While this incredible low cost of credit has given undeniable benefits to borrowers, if you were one of the many Australians relying on getting a return on cash you have in the bank the past year has not been one to remember,” Marshall said.

“It’s increasingly likely that we will see more lenders increasing fixed rates in the coming months. The end of the TFF and increasing expectation of inflationary pressures, which could also see central banks eventually having to increase rates, longer term rates are no longer at their all time lows.”

Which bank has the best interest rate for saving accounts?

Judo Bank’s 1 per cent interest rate is the highest 12-month term deposit rate on Mozo.

That’s followed by Teachers Mutual Bank and MyLife MyFinance’s 0.9 per cent. BankVic and MyState Bank offer 0.85 per cent term deposit rates.

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