The country’s four major banks and other deposit takers are facing intense scrutiny from policymakers and consumer advocates over their calculated efforts to skew rate increases in favour of new depositors and holders of bonus saver accounts.
Research conducted by financial services comparison website Canstar shows that millions of Australian depositors holding so-called “base rate accounts” have been denied the benefits of most RBA rate rises this year.
Base rate accounts require depositors to meet fewer conditions than bonus saver accounts to qualify for monthly interest payments.
They remain one of the most popular types of savings vehicles held by Australians and are mostly marketed by the banks as “internet savings accounts”.
The Canstar research shows that since the RBA began tightening monetary policy in May the four major banks have heavily skewed the pass through of official rises to bonus saver products and away from internet accounts.
In many cases bonus saver accounts are highly conditional, with customers often required to make no withdrawals or to build higher balances to qualify for a material interest payment at the end of each month.
Banks are driving customers to such products because they know a proportion of customers will be unable to qualify for interest at the end of any given month.
According to the Canstar research, holders of base rate accounts at major banks are currently earning average annual interest of only 0.79 per cent, while bonus account holders are getting on average 2.09 per cent.
The average offer on base accounts at non-major banks and credit unions is slightly better at 1.05 per cent.
Canstar director Steve Mickenbecker says the major banks have passed on to base accountholders less than 80 basis points of the 225 basis points of official rate increases between May and the end of September.
“I’m agnostic as to which type of accounts people should be in but I think most would be better off if they took up bonus saver accounts,” he said.
“Irrespective of what accounts they choose I think there is a reasonable community expectation that customers with base rate accounts should be getting their fair share of deposit interest right now and the fact is they are not.
“I don’t think these pricing policies are sustainable for the banks – sooner or later their customers with base accounts will vote with their feet.”
Commonwealth Bank’s leading base rate account is marketed as the Netbank Saver, while NAB brands its equivalent product as the iSaver.
Both currently pay annual interest of 0.85 per cent to established customers, which is way less than the 2.75 per cent base rate Macquarie pays on its market-leading online savings account.
Mickenbecker says small banks and credit unions are also penalising customers for holding deposits in base accounts, saying they are mostly playing the same game as the majors in offering more generous rates to those with bonus accounts.
“The rates are a little higher at the non-majors but the gap is not as much as one would expect,” he said.?
“I don’t think most small deposit takers can hold their heads up much higher than the big four banks.
“Generally, I don’t think Australian banks are meeting community expectations on the pass through of official rate increases to deposit holders.
“Depositors have been super patient during the extended low rate environment and frankly I think they would be disappointed at how they are being treated in the new rate cycle.”
Apart from bonus savers, the other big winners in the deposits market have been customers signing up to new accounts.
The banks have been fattening introductory rates on base rate accounts to get fresh cash into their vaults, with NAB coughing up as much as 2.3 per cent for the first four months on the iSaver product.
That’s almost three times the base return that it is willing to pay longstanding iSaver customers.
In a controversial decision on Tuesday Westpac said from 18 October it will boost the introductory offer on its eSaver product to 2.55 per cent for five months, but will continue to anchor the ongoing base rate for established accountholders at 0.85 per cent.