One bank has already increased the bonus interest rate on its savings account, and other banks may do the same throughout the year.
Interest rates on savings accounts have been at historic lows for almost 2 years now. Let’s take a look at why interest rates are so low, if they’ll go up soon, and some of the best rates available right now.
Why are savings account interest rates so low?
There are several reasons for this, but the main one is due to the official exchange rate.
After a series of rate cuts over the past 2 years, the RBA cash rate is also at an all-time low of just 0.10%. With the cash rate so low, mortgage rates have also been low, which is great news for homeowners, as it means less interest to pay back (for now). But that hasn’t been good news for people with money in the bank looking to get a return on their deposit.
Since banks and lenders charge less interest on mortgages, they cannot pay customers as much as interest on their deposits. It’s a balancing act for banks.
Will savings account interest rates rise this year?
While no one knows for sure when (or if) savings account interest rates will finally start to climb again, it’s likely that we’ll see some banks raise rates this year. AMP has already increased the total bonus interest rate on its AMP Saver account from 1.16% per annum to 1.35% per annum this month (the new rate of 1.35% per annum will take effect on February 1st).
While the RBA hasn’t said whether or not it will raise the cash rate this year, we’ve started to see banks raise their home loan rates anyway. There’s no guarantee a bank will raise interest rates on savings as it raises mortgage rates, but it’s an early indication that it might.
However, any increases in savings account interest rates we see are likely to be quite minor, so don’t expect to earn much more than 3% per year on your savings for quite some time (sorry!) .
What are the best savings account rates right now?
If you are between 18 and 29 years old, you can earn 2.50% per year with a Westpac Life Savings Account, on balances below $30,000. You must increase your balance each month, ensure your balance remains above $0, and make more than 5 debit card purchases from your linked Westpac Choice transaction account each month.
In line with the AMP Saver, the ING Savings Maximiser also offers a bonus rate of 1.35% per year when the conditions are met. To earn the bonus rate, you must deposit at least $1,000 per month, make more than 5 card purchases, and increase your Savings Maximizer balance (excluding earned interest). The AMP Saver bonus rate is a bit easier to earn, just increase your savings by $250 each month.
The Virgin Money Boost account offers 1.20% per annum when you deposit at least $2,000 each month (or $1,000 if you are under 25) and make at least 5 transactions from the account in the previous month.
Want to earn more interest on your money this year? Compare high interest savings accounts and upgrade to an account with a better rate.