Commonwealth Bank and National Australia Bank have announced rate cuts to their savings and term deposit accounts.
Effective from last Friday (14 June), CBA said it has reduced the interest rate on its PenSec product by 25 basis points, its NetBank Saver product by 20 basis points and its GoalSaver product by up to 30 basis points.
It also slashed the rate on NetBank Saver accounts by 31 basis points and GoalSaver accounts by 25 basis points.
A CBA spokesperson stated that the changes “reflect current market conditions, including the record-low interest rate environment”.
“In making our interest rate decisions, we have carefully considered a range of factors, including the current low-rate environment, and believe our deposit products continue to provide value for our customers,” the spokesperson said.
NAB announced a similar move on Friday, cutting its cut at-call savings account rates by up to 35 basis points and its term deposit rates by 10 to 25 basis points.
Specifically, the rate for NAB's Reward Saver accounts has been sliced by 35 basis points and iSaver accounts by 25 basis points.
A NAB spokesperson provided a similar statement, saying that the bank “regularly review our products and pricing, including term deposits and savings accounts, to ensure we are supporting our customers while also responding to market changes.
“The costs associated to provide these products is based on a range of factors, including the prospect of a change in the cash rate, borrowing costs and economic pressures.”
The remaining big four banks, ANZ and Westpac, are also expected to announce changes. However, Canstar’s finance expert, Steve Mickenbecker, believes the amount they cut won’t be “so deep” because, unlike CBA and NAB, they did not pass on the full 25-basis-point rate cut made by the Reserve Bank earlier this month.
Mr Mickenbecker said the savings rate cut was foreseeable following the RBA’s decision to drop the official cash rate to a new record low of 1.25 per cent after nearly three years of keeping it stable at 1.5 per cent.
“This leaves savings rates at rock bottom levels and will put the banks under intense pressure if and when the RBA cuts the cash rate again in the next few months,” he said.
“The potential to squeeze profit margins will be keeping bank executives awake at night.”
Vadim Taube, chief executive of InfoChoice, said at-call savings accounts rates have never been this low.
“These rates are now only fractionally above the inflation rate of 1.3 per cent and the base rates are all well under the inflation rate. That means your money is not growing significantly in real terms and could be losing value if you leave it sitting in one of these low rate savings accounts," Mr Taube said.
“I urge all savers to check their savings account and compare it with the rest of the accounts in the market. There’s no need to put up with a savings account that pays a pittance."
Non-major banks are following the lead of CBA and NAB, with ME, AMP and BOQ set to cut savings rates as well, according to InfoChoice.
AMP Saver account holders will be subjected to a 20 basis point reduction in the savings rate, while customers with BOQ's Bonus Interest Savings accounts and Fast Tracker Saver accounts will see decreases of 20 basis points and 25 basis points, respectively.
The interest rate for ME Online Savings accounts is expected to be reduced by 25 basis points, while Suncorp Growth Saver account holders will see a 30 basis point contraction in the rate.
[Related: More lenders commit to full RBA rate cut]