When the Reserve Bank cut the official cash rate by 25 basis points last month, mortgage holders were quick to get some good news: lower home loan rates. But savers? Not so much.
While home loan borrowers are getting some relief, savers are facing a different story. Lower savings rates mean you’ll earn less interest on the money sitting in your bank account—ouch.
This comes after a period where savers were actually enjoying decent returns, following the rock-bottom rates during the pandemic.
Did All Lenders Pass on the Rate Cut to Borrowers?
Surprisingly, no.
Out of all the lenders, 66 have cut rates for mortgage customers on at least one of their variable loans. But Virgin Money decided to break from the pack. It won’t be passing on the cut to its home loan customers, though it will lower the interest rate on savings accounts from April 2.
Virgin’s spokesperson said their decision was about balancing competitiveness with funding costs and stakeholder needs. But consumer experts, like Graham Cooke from Finder, found the move "very surprising" given how most lenders rushed to drop their rates.
Virgin Money, which is owned by the Bank of Queensland (BOQ), saw a dip in retail home lending growth in 2024. Cooke speculated that BOQ might want to focus more on business lending instead. And hey, a few other lenders still haven’t announced their plans, so there could be more surprises ahead.
What’s Happening with Savings Rates?
If you’re a saver, the news isn’t great. According to financial comparison site Canstar, 51 banks have cut at least one of their savings rates since the Reserve Bank’s February decision. Most of these cuts were the full 0.25 percentage points.
Sally Tindall from Canstar explained it bluntly: "Banks cut savings rates to recoup the cost of cheaper mortgages." And not all cuts are equal—some banks reduced their base savings rates, while others cut their bonus rates.
How High Are Savings Rates Now?
The best ongoing savings rate you can get right now is 5.4%, but it comes with a catch—there are monthly terms and conditions you’ll need to meet.
Canstar’s data shows eight banks offering ongoing savings rates above 5%, but again, you’ll need to jump through some hoops to get those rates. Tindall advised that a competitive rate is anything above 4.75%, while a highly competitive rate is over 5%.
What About Home Loan Rates?
For home loans, things are looking better. There are 32 lenders offering at least one variable home loan rate under 5.75%.
“If you’re an owner-occupier, paying principal and interest, a good rate starts with a 5, not a 6,” said Tindall.
Most lenders passed on the full 25 basis points cut, but there’s a catch. Some lenders treat new and existing customers differently, meaning new borrowers might score better deals than those with existing loans.
More Rate Cuts on the Horizon?
Maybe, but not right away.
The Reserve Bank dropped the cash rate to 4.1% in February, and economists are predicting more cuts this year. The big four banks are split, with ANZ expecting one more cut, while CBA, NAB, and Westpac predict up to three more cuts.
However, the latest minutes from the RBA meeting and comments from the RBA governor suggest more cuts might not come immediately. So, if you’re a saver, it might be worth keeping an eye on your bank statements—and if you’re a borrower, maybe it’s time to shop around for a better deal.
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