Why savers are being left behind as lenders pass Reserve Bank hike to mortgages

Borrowers have been slugged with higher mortgage rates after the Reserve Bank’s May hike, but many savers will miss out unless they meet the fine print on bonus accounts.

The big four banks have all moved to pass on the 25 basis-point increase to variable mortgage customers, adding to the squeeze from two earlier rate rises this year. But savers get a hike with strings attached.

Savings.com.au editor Dominic Beattie said the major banks typically took about 10 days to move savings rates, roughly the same time they took to lift home loan rates.

But the issue is not always how quickly banks move, but where they put the increase.

“On the surface, it appears the big four have been passing on hikes to savings accounts in full this year,” Mr Beattie said.

“But for some savings products, we’ve seen hikes only passed on to the introductory or bonus rate, instead of the base rate.”

That means savers whose introductory rate has expired, or who miss monthly bonus conditions, may receive little or none of the increase.

Canstar director of data insights Sally Tindall said banks were far more selective with deposit rates than mortgage rates.

“Even within the same account, they may lift the bonus rate but leave the base rate almost untouched.”

Canstar analysis of the March cash rate hike found bonus saver headline rates rose by an average of 28 basis points, more than the RBA’s 25 basis-point increase.

Base rates — the rate paid when customers fail to meet account conditions — rose by just one basis point.

Bonus saver accounts often require customers to deposit a minimum amount, make a set number of transactions, avoid withdrawals or grow their balance each month.

Some also come with caps, age limits or introductory rates, meaning the advertised return may only apply to certain customers or for a limited time.

Canstar data shows 58 per cent of Australians have a savings account with conditions attached to earn the maximum rate, while 41 per cent of bonus savers miss out on the maximum interest.

Eleven per cent say they never meet the conditions.

Ms Tindall said the conditions could hurt households at the exact moment they needed flexibility.

“The cost of living is really biting for many families, and one of the most common conditions on bonus saver accounts is that you must grow your balance,” she said.

“If you need to dip into your savings, you can miss out on the bonus interest for that month, often when you need that extra interest the most.”

Some savers also wait longer than others.

Mr Beattie said AMP Bank Go and Judo Bank had been among the fastest to lift savings rates this year, while some banks waited until the start of the following month.

He said WA-based P&N Bank tended to make savings rate hikes effective from the first day of the following month, creating a 27-day wait for this month’s increase.

The Australian Competition and Consumer Commission recommended in 2023 that banks alert customers when they were at risk of missing bonus interest and provide clearer disclosure of introductory rates.

But no major reforms have followed.

Ms Tindall said banks should be required to warn customers before they miss out on bonus interest, rather than after the month has ended.

“Life is busy, and most people don’t have the time or headspace to constantly monitor whether they’ve met every requirement,” she said.