“Participants noted that, given the cash rate remains at a low level, there has been much less pass-through to deposit interest rates than to lend interest rates so far. It was agreed to continue to monitor pass-through closely,” the Council said in a statement on Thursday.
Former prime minister Scott Morrison during last month’s election campaign urged banks to raise deposit rates, but generally, there is less public scrutiny of deposit rates than mortgage rates.
Importantly, banks have increased term deposit rates more sharply, which should help savers such as retirees. Even so, the lack of movement in at-call savings accounts is a sign of the large deposit balances banks are holding, which means there is less pressure to compete for funds.
Steve Mickenbecker, group executive for financial services at Canstar, said increases in deposit rates had been “patchy,” with some banks moving bonus rates or introductory rates rather than the base rates that all customers receive.
“They are not having to work very hard on the deposit front at the moment because they amassed these huge deposits back during COVID,” Mickenbecker said.
Even so, Mickenbecker said that in previous cycles of interest rate rises, deposit interest rates had ultimately lifted more steeply than rates on loans. He expected banks would need to compete more aggressively to attract deposits in six to 12 months, as wholesale funding costs increased.
“There’s still reasonable hope that eventually, savings increases will start to outstrip home loans,” Mickenbecker said.
The council also said regulators were thinking about how rising interest rates could affect households facing higher mortgage repayments and lower borrowing capacity. It said the housing market appeared to have weakened in major cities, and mortgage lending was starting to slow.
“The council will be closely monitoring the effects of interest rates on the household sector rising,” it said.
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