Finance noob here.
Variable loan rates by most financial institutions went up by 0.25% almost simultaneously as soon as the reserve bank recently announced the increase in interest rates by 25 basis points.
However what about the interest rates for savings accounts? What’s the rationale behind the delay in savings interest rates going up? Is it simply because the banks are greedy or is there a more sophisticated reason which I’m failing to comprehend?
Looking forward to the comments! Cheers
Volt Bank savings account went up straight away. It's currently the highest non behavioural rate!
You have a volt bank referal.code
They don't do referral bonuses… They'll open for new accounts soon. Macquarie is the next best non behavioural. There are better rates, but they require putting X in every month or intro periods only.
I'll post a table tomorrow. Home with sick kids.
Macquarie's 1.5% rate is introductory for 4 months only. Best to switch to AMP Savings after the 4 months as the rate is higher at 1.35% when you deposit $250 or more in the previous month.
Legacy banks are paying +10% ROE.
They pay zero to savings and use the deposits to get yield from lending with a zero capital reserve.
Savers are getting shafted while banks and stonksholders are getting richer.
No SRD?
I don’t know what you’re referring to, but banks need to hold a minimum level of capital and often have buffers on top of this. It’s mostly based on Basel 3
@El-Rhi: The Fed Reserve in the US reduced the reserve requirement ratio to zero in March 2020.
What are the reserve requirements for Basel 3 and is Australia legally required to follow it?
@rektrading: APRA sets the capital standards in Australia, which are mostly based on Basel 3 with some slight differences.
All regulated banks in Australia need to follow this
https://www.apra.gov.au/capital-explained
US banks are required to hold minimum capital levels too. The reserve requirement that moved to 0% in March 2020 is not related to capital adequacy
https://www.federalreserve.gov/publications/large-bank-capit…
@rektrading: 4.5% is the minimum. Once you add the buffers, most are around 8%. You’re in trouble if it’s down to 4.5% which is why most banks manage in the 10-15% range
I think it’s because the cash rate is still incredibly low, and inflation is being set under real inflation, so any gains you may have earnt in interest are already gone. The banks also aren’t making money on interest on mortgages yet either. They don’t need your money because cash is still cheap.
https://www.finder.com.au/will-savings-interest-rates-rise-2…
Banks make money at the expense of customers, more news at 7.
simple, its a business, they like to make money
Banks dont need your money other than to meet capital requirements. The money they lend out can be borrowed for less cost than it costs to source the money from deposits, so they only need to attract just enough money for capital requirement. Hence no major incentive to offer high rates, the banks dont need your money, they have plenty.
However the flip side is that if the cost of borrowing money (to lend) increases, then the cost to banks increases immediately. Banks generally dont lend you $500,000 for 25 years and then borrow $500,000 for 25 years, resulting in no additonal cost if banks borrowing rates go up. To fund that $500k they might borrow a mix of overnight, short term, long term etc. So an increase in interest rates increases costs increases lending rates. At some point in time it may be cheaper to fund loans from deposits than from the money market, in which case deposit rates will increase sharply
Of course, if banks can increase the margin between costs (bank borrowing, deposit rates etc) and revenue (loan interest) the better. So there is a profit motive as well.
Coz banks are there to make money - not make you money
But some of the banks did put up saving rates:
https://www.dailymail.co.uk/news/article-10780139/NAB-Westpa…
I wouldn't be surprised if OP hasn't even checked his own accounts. Or bothered to look for one that has increased rates.
Interest on NAB Reward Savers accounts has doubled from 0.25 to 0.50 per cent
CPI is 5.1% and inflation is +15.0%.
CPI is an indicator of inflation over a certain period ( 5.1% being 1 year). Also called headline inflation. How did you come up with underlying inflation of 15%?!?
Things that I buy is up by +15% YoY.
@rektrading: Satoshi is to blame for entire crypto market retraction of >50%, that also strangely correlates with similar down trends in external markets like S&P500 over the same period
Man, their koolaid is powerful :)
@SBOB: Oh no, no matter how far the crypto market is down, rektrading is always miraculously ahead. Crypto experts are never in the red.
Why Savings Have Remained The Same?
CPA offered me 2.25% p.a. with a new Term Deposit for 18 months, not sure if that's good or not.
Edit: Have just done a quick Google search and it seems Judobank is killing it with their term deposit rates.
The banks have little competition to compel them to raise rates. The government should create a bank then in 2080 sell it off to make the 2060ers pissed off at old millennials!
Greed
Is this a trick question ???
Banks are not a charity.
Opens dictionary to Capitalism, sees picture of bank
Also, this might help (in layman's terms) - https://www.abc.net.au/news/2022-05-07/interest-rate-rise-bi…
https://www.apra.gov.au/apra-explains-liquidity-banking
Bank pays interests on saving account is because they need captial. But they can't lend 100% of the money out, so it costs them to keep cash. Bank passes full rate rise to mortgage holder to keep expenses neutral. In order to raise saving interest, they need to raise mortgage rate even higher.
People are already spook with interest rate out of the emergency level of 0.10% and next few months we will see increasing rate. Bank is not in the position to fully reward saving account holders …
Rabobank just put up their rates 0.25%
Flat Rate
Volt VoltSAVE 1.15%
Macquarie Savings 1.00%
Qudos Bank Qsaver 0.45%
Intro Offers Base + Intro = Total
RaboBank HISA 0.25% 1.10% 1.35%
Macquarie Savings 0.7% - 0.95% 0.40% 1.35%
Volt VoltSAVE 1.15% 0.00% 1.15%
Behavioral Base + Bonus = Total
Westpac Life 0.15% 1.85% 2.00%
BOQ FastTrack 0.05% 1.95% 2.00%
AMP AMP Saver 0.10% 1.25% 1.35%
ING Savings Maximiser 0.05% 1.30% 1.35%
Virgin Money Boost Saver 0.05% 1.30% 1.35%
Behaviors vary, examples
For interest, grow balance during month, make a deposit into the account pm and make 5 settled card transactions pm. Linked transaction account required, fees can apply. 1.85% conditional bonus interest for 18-29YOs: up to $30,000. Standard bonus in 0.10%, total interest 0.25%. No monthly fee.
For Special bonus 14-24yo: deposit $200 p/m into linked Day2Day and make >5 transactions p/m. Standard bonus: Link to Tran Acct, deposit $1K into Tran pm. >5 transactions in trans acc, up to $250,000. 0.05% for balances >$250,000. Conditional special bonus for 14-24yo's, up to $10,000. Standard bonus is 0.75%, total 0.80%. No monthly fee. Linked Day to day required.
Bonus when you deposit $250pm. Balances over $250,000 will receive a flat rate of 0.10%. Maximum balance is $5m. No monthly account fee.
Virgin money just went up to 1.60%
was that for ?
Additional variable interest rate earned on a Boost Saver where the optional Lock Saver Feature is enabled.
Provide 32 days’ advance notice to unlock your account or withdraw your money.
This feature may be suitable for savings you don’t need to immediately access to. For more information, go to our Lock Saver Feature website page.
FYI, due to the 32 day cashout requirement we categorised this product as a TD.
Not really a term deposit, and less onerous than the ING balance must always go up condition really.
RaboBank HISA 0.25% 1.10% 1.35%
This changed 2 days ago to: 0.50% 1.10% 1.60%
Interestingly Term deposits have really gone up.
After years of term deposits being worse than HISA rates, suddenly you can get 4% on 5 year term deposits from AMP as of a few weeks ago. Over 3% for shorter terms.
Suggests they think rates are going to get higher.
Actually only lose 0.25% if you withdraw early too, unless they change their conditions during the term.
Net interest margins have been smashed over the last few years… most have gone from around 2.1% a couple of years ago to around 1.7% now. Banks are doing everything they can to increase margins slightly and one way of doing this is to not pass on rate rises to depositors. It makes sense as banks don’t really need deposits at the moment, most are flush with liquidity
Bank logic
When I have to take money its instant
When I have the give money I'll take my time.