Reserve Drops Interest Rates To Their Lowest Ever

There are usually no surprises in the ways the big banks react to any Reserve Bank changes in the cash rate… but this week was different.

By going down, as it has 12 times since 2011, the only question is how much will they withhold from borrowers of the home loan rates cuts and for what spurious reasons.

The dead cert, or was until last Tuesday, was that interest paid to savers on term deposits would go down by the full rate of the cut and in double quick time.

Hence we’ve had the lop-sided triumphalism heralding every 25bps reduction, which is just one quarter of one per cent, which benefits mortgage holders but penalises savers.

But in a surprise move, which the banks managed to coordinate magnificently, they held back almost half of the cash rate cut and raised by 0.55% the rate for one-year term deposits.

This is good news for many FiftyUp Club members many of whom are self-funded retirees and are looking for more lucrative places to park their savings.

In our last poll on the subject 50% reported that cuts to the cash rate were a ‘ disaster’ for their savings plans. While  21%, perhaps those with home loans, thought such moves were ‘great’ .

Don’t think the banks are being charitable in raising the deposit rates which, by the way,  only apply to new term deposits.

They have their reasons which include the need to attract more domestic deposits because of regulations to ensure stability.

If you use term deposits as a vehicle for funding your retirement be aware other so-called non-banks can offer real competition in the rates.

The higher rates offered by this sector  is one other reason commentators have given for the banks having to lift their rates and game to attract deposits.

It pays to check which can easily and safely be done on several comparison site and the joy of term deposits is that they are usually simple and easy to compare.

So no thanks to the banks for withholding the full amount of the rate cut but a big thanks for at last handing a little back to the people without whom they’d be no banking sector- the savers.