As the official cash rate continues to rise, interest rates on savings accounts are heading for record highs.
With three of the big four banks predicting a 0.25 basis point increase in Tuesday’s RBA July board meeting, savings rates are tipped to surpass the 6 per cent mark.
It comes as financial regulator APRA on Friday released fresh data showing Australians deposited $1.38 trillion in May – up $5.2bn on the previous month.
With more Aussies squirrelling more cash away in uncertain economic conditions, they can be expected to take advantage of high interest ongoing savings accounts.
Smaller banks are offering some of the highest ongoing savings rates of up to 5.50 per cent, but taking advantage of the high rates has prompted warnings from comparison website RateCity.com.au.
Their research director, Sally Tindall, says Australians have more than $390bn more in the bank than they did before Covid – an almighty buffer for the nation to fall back on.
“The problem is, some people are still spending up big at the shops, others are stashing it at the bank, while many families are living month-to-month with their budget often in the red,” Ms Tindall says.
“Savings rates have already hit 5.50 per cent. They could very well break the 6 per cent barrier if many of the economists’ forecasts are realised.”
But these accounts come with a catch: They have monthly conditions that need to be met otherwise the interest drops to a much lower base amount.
For example, a Bank of Queensland Future Saver account requires at least $1000 to be deposited, and at least five transactions to be made every month, or else the interest drops from a healthy 5.50 per cent to just 0.05.
“Before you sign up to a new high interest savings account, have an honest conversation with yourself about whether you’ll qualify for the bonus interest each month,” Ms Tindall said.
“While the maximum rates look fantastic on paper, a couple of slip-ups could see your interest rate drop to the floor.
“If you’re looking to maximise your interest, spend 15 to 30 minutes looking at your options to see if you can do better elsewhere.”
The official cash rate sits at 4.10 per cent after June’s meeting when the RBA raised the rate for the 12th time in 13 meetings.
Westpac, NAB, and ANZ economists forecast rate rises on Tuesday and again in August, while CBA thinks the RBA board will keep rates on hold in July before a rise in August