The Reserve Bank has cut down the official interest rate to an all-time low of 1.75 per cent, but it’s a blow to retirees who are relying on their savings.
RBA cuts interest rates to record low, AUD tumbles https://t.co/A1KvtmPJCK
— Financial Times (@FinancialTimes) May 3, 2016
The RBA announcement could see retirees losing as much as $1,250 on a 12-month term deposit of $500,000, or $625 on a $250,000 term deposit.
National Seniors Australia CEO Michael O’Neill says the 0.25 percentage point cut would further disadvantage older Australians on low, fixed incomes.
“Many pensioners and self-funded retirees hold term deposits because of the security and peace of mind they represent,” O’Neill says.
“These same people are also facing the double whammy of cuts to their pension or part-pension when eligibility rules change from January next year.”
A low interest rate means a lower return, or barely a return now.
He says in the lead up to this year’s Federal election older people need less uncertainty and more reassurance on how they can make ends meet.
“For too many, the prospect of another hit to their dwindling incomes does not fill them with confidence,” O’Neill says.
At least one major bank, NAB, will pass on the interest cut in full.
We’re passing on the 0.25%pa cut to our variable rate home loan customers. pic.twitter.com/E9Uua1C5xv
— NAB (@NAB) May 3, 2016
While the remaining big four banks might wait until they know the outcome of the Federal Budget before making any decisions.
The 1.75 per cent rate is the lowest cash rate in Australian history, and ends 12 months of rate stability from the Reserve Bank.