ING, ME and UBank cut savings rates, with 0% returns on the horizon

Nov 11, 2020
Savings account interest rates are getting the chop across the board. Source: Getty.

Some of the most generous savings-rate payers have now acted on the Reserve Bank of Australia’s (RBA) cash rate cut to 0.1 per cent – and if it’s an indicator of what’s to come from the rest of the banking sector, it’s not good news.

ING, ME Bank and UBank have all announced 0.15 per cent rate reductions on their most popular savings accounts, effectively passing the central bank’s rate cut on in full.

Going forward, ING’s Savings Maximiser – the account that received plenty of love from the Barefoot Investor himself, Scott Pape – will pay 1.35 per cent, down from 1.5 per cent. Even so, ING’s rate still be the second-highest conditional ongoing savings rate on the market, in line with neo-bank 86 400 (which has dropped to 1.35 per cent, from 1.6 per cent) and just behind the MyState Bank Bonus Saver Account, which is currently offering 1.5 per cent.

ME Bank, which is owned by the largest industry superannuation funds, cut the maximum rate on its Online Savings Account by 0.15 per cent to 1.2 per cent. And NAB-owned digital bank UBank has said cuts will be made by 15 basis points by Friday. The base variable rate on its USave account will be reduced from 0.40 per cent to 0.25 per cent per annum, taking the maximum interest rate down to 1.31 per cent.

Since the RBA’s cash rate cut last Tuesday, nine banks have dropped rates on at least one savings account, which has brought the average ongoing savings rate down to just 0.49 per cent, according to RateCity.com.au. This rate predicted to drop to below 0.4 per cent in coming months as the impact of the RBA cut starts to filter through to other savings accounts.

Sally Tindall, research director at RateCity.com.au, said that seeing some of the highest ongoing savings rates slashed was disappointing but simply a sign of what’s to come in the banking sector.

The Big Four banks had preemptively cut their savings rates ahead of the central bank’s widely expected decision to lower the official cash rate from 0.25 per cent to 0.1 per cent. And Tindall cautioned that it was possible ANZ, Commonwealth Bank of Australia, Westpac and National Australia Bank could cut their savings rates even further.

Australia’s biggest banks already offer an ongoing savings rate of just 0.05 per cent on their standard savings account,” she said. “They won’t want to cut this rate down to zero but it could happen.”

At the time of writing, CBA’s NetBank Saver was paying 0.75 per cent and its GoalSaver 0.5 per cent, Westpac’s eSaver and Life accounts were both at 0.75 per cent, ANZ’s Online Saver was 0.65 per cent and its Progress Saver 0.7 per cent and NAB’s iSaver was 0.75 per cent and its Reward Saver 0.7 per cent.

Smaller banks and neo-banks have also made cuts in line with the RBA. Popular Australian neo-bank Xinja cut its Stash account rates to 1.5 per cent from 1.65 per cent, and although this is tied with the MyState Bank Bonus Saver Account as offering the highest currently available to savers, Xinja has stopped opening Stash accounts for new customers.

“Savers should keep a keen eye on their account over the next few weeks to see if their rate gets cut,” Tindall advised. “There’s a real chance a handful of banks will drop their base rates to zero, leaving some customers empty handed. Hitting rock bottom might, at the very least, convince some people to seek out a better savings account.”

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.

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Are you relying on savings account interest for income? How have the rate reductions impacted you?

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