Deposit takers slow to pass on higher rates

There might be intense competition for retail deposits but financial institutions in Australia have been slow to change the rates on their high-yield online savings accounts.

At the end of last week, InfoChoice listed 45 lenders that had put up their standard variable home loan rates, following the Reserve Bank's 25 basis point increase in the official cash rate on October 6.

But InfoChoice was able to list only 14 institutions that had increased their online savings account rates.

Two weeks after the RBA announcement borrowing rate increases are outstripping deposit rate increases three to one. This is what analysts refer to approvingly as margin decompression.

Among those that have put up online deposit rates are three of the big four (Commonwealth, NAB and Westpac), St George, BankWest, BankSA, Citibank, ING Direct, Suncorp, Savings & Loans Credit Union, Easy Street Financial Services, CUA, Big Sky Credit Union and Bank of Cyprus. All moved by 25 basis points

NAB increased the rate on its iSaver account but its online offshoot, UBank did not change the rate on its USaver account. However, USaver remains the market leader with a base rate of 5.11 per cent and a bonus rate of 5.21 per cent for customers who set up an automatic savings plan of at least $100 a month.

ING Direct increased the base rate of Savings Maximiser to 3.75 per cent and has a promotional deal that pays 125 basis points over the base rate until January 31 next year for anyone who opens an account before the end of November.

The other rate leaders are RaboPlus, which is offering a bonus rate of five per cent (base rate is three) to PremiumSaver customers who make regular savings. The other RaboPlus online account, RaboPlus Savings Account, has a base rate of four per cent with no bonuses or intro rates.

NAB iSaver is offering an intro rate of 4.65 until January on a base rate of three per cent, AMP eASYSaver is offering an intro rate of 4.55 and a base rate of 2.8 per cent.

In the term deposit market, there is a wide range of rate movements. BankWest put its 90-day term deposit rate up 205 basis points to 4.25 per cent and Adelaide Bank put its 90-day rate up 190 basis points to 4.3 per cent.

Suncorp put its 180-day term deposit rate up 80 basis points to 4.9 per cent. Bank of Cyprus put its 180-day rate up 70 basis points to 5.2 per cent.

BankWest put its 12-month term deposit rate up 184 basis points to 5.35 per cent. Commonwealth Bank put its 12-month rate up 85 basis points to 5.35 per cent.

BankWest put its two-year rate up 150 basis points to five per cent. Commonwealth Bank put its two-year rate up 80 basis points to 5.8 per cent and Suncorp put its rate up 80 basis points to 5.6 per cent.