The battle for deposits amongst Australian lenders seems to be petering out, with only two of the country’s top online savings accounts passing on November’s interest rate hike by the Reserve Bank of Australia, to their customers in full.
Despite failing to pass on the interest rate increase to depositors, bank’s continue to make the argument that higher funding costs are the reason behind higher interest rates which have been passed onto borrowers in excess of official rate hikes by the central bank.
Most of Australia’s online banks have declined to pass on the 25 basis point rate hike to their customers, with some of them even doing the opposite and cutting their promotional rates.
Virgin Money cut its promotional rate by 24 basis points for its online savings account at the start of the week, when this cut is bundled together with the 25 basis point rate hike enacted by the central bank, the effective rate cut equates to 49 basis points.
Bankwest continues to offer the highest promotional online interest rate of 7 per cent despite failing to pass on the interest rate increase to its customers.
ANZ did pass on the rate hike to its customers and currently offers a 6.25 per cent interest rate to all its savings accounts, whilst Westpac and CBA did so only for their highest interest accounts.
Since the financial crisis in 2008, a dramatic battle for deposits erupted between Australian banks, as they sought to diversify away from wholesale international funding markets which are volatile and froze during the crisis, to a more stable depositor based funding.
The latest moves by lenders not to pass on rate hikes to their depositors implies that the intensity of competition between lenders is levelling off.