Sign of end to the war over deposit rates
Savers have benefited in recent years from relatively high rates on term deposits and online savings accounts, as banks fought to get a bigger share of their funding from households. But there are now signs the "war for deposits" is easing.
According to the comparison service RateCity, seven institutions this month cut rates on a range of products by between 0.3 and 0.5 percentage points, more than the Reserve Bank's 0.25 percentage point cut in the official rate, suggesting competition to attract funds is less fierce.
ME Bank cut its online saving product by 0.35 percentage points to 3.15 per cent, Bankwest cut its rates on one of its savings accounts 0.5 percentage points to 5 per cent and Heritage Bank cut its rates for deposits between $100,000 and $250,000 by 0.35 percentage points.
ME Bank chief executive Jamie McPhee said the bank did not have access to the cheaper sources of funding available to major banks but its rates remained higher than those offered by the big four.
"When making interest rate decisions ME Bank always seeks to balance two important objectives: maintaining a fair level of earnings for the not-for-profit industry super funds and their members who own ME Bank, and providing genuinely fairer interest rates to all our customers - both depositors and borrowers," he said.
A spokesman for Bankwest said it had cut rates for the product in question after keeping rates unchanged in December. "The Regular Saver product is still very competitively priced and the deposits market remains competitive," he said.
A Heritage spokesman said the bank was bringing a "very good" rate into line with other products.
However, RateCity spokeswoman Michelle Hutchison said the reductions spelt "the end of unusually high savings account rates and less competition for savings accounts".
Households had $592.5 billion on deposit with the nation's banks at the end of March but bankers think that lower interest rates may tempt more people to shift their savings to other assets.
Frequently Asked Questions about this Article…
The article reports that several institutions have cut savings rates by between 0.3 and 0.5 percentage points — larger moves than the Reserve Bank's 0.25 percentage point cut — suggesting banks are offering less of a premium for household deposits as competition for funds eases.
According to the article, ME Bank cut its online savings product by 0.35 percentage points to 3.15%, Bankwest cut rates on one savings account by 0.5 percentage points to 5%, and Heritage Bank reduced rates on deposits between $100,000 and $250,000 by 0.35 percentage points. RateCity also noted seven institutions made cuts of 0.3–0.5 percentage points this month.
The Reserve Bank cut the official rate by 0.25 percentage points, while several banks reduced some savings and deposit products by between 0.3 and 0.5 percentage points — in some cases cutting faster and by more than the official move.
ME Bank CEO Jamie McPhee said the bank does not have access to the cheaper sources of funding available to major banks. He added ME Bank aims to balance fair earnings for the not‑for‑profit industry super funds that own it with providing fair interest rates to depositors and borrowers, and noted its rates remain higher than those of the big four banks.
A Bankwest spokesman said the specific product's rate was cut after remaining unchanged in December and described the Regular Saver as still 'very competitively priced' in a competitive deposits market. A Heritage spokesman said the bank was bringing a 'very good' rate into line with its other products.
RateCity spokeswoman Michelle Hutchison said the reductions mark 'the end of unusually high savings account rates and less competition for savings accounts,' indicating the 'war for deposits' may be easing.
The article states households had $592.5 billion on deposit with the nation's banks at the end of March. Bankers believe that lower interest rates may tempt more people to move savings into other assets.
The article's key takeaway for savers is that many banks are reducing savings and term deposit rates — in some cases by more than the official cash rate cut — which signals less aggressive competition for household deposits. The piece also notes this environment could encourage people to consider other asset options, according to bankers, though it does not provide specific investment advice.
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