What are the highest savings account rates at the cash rate peak?

Today the Reserve Bank of Australia kept the cash rate on pause at 4.10%. However, at least one more hike has been forecast by NAB economists this year, and it may be the last increase in this cycle of tightening. 

This means that the cash rate may officially peak at 4.35% in 2023, before potentially being cut in 2024 or 2025, according to the big four banks. 

While this is big news for homeowners, it’s also important for savers, as savings accounts may finally be on track to beat inflation. Let’s explore what the highest savings account interest rates will be at the cash rate peak. 

How high will saving account rates go?

The interest rates on savings accounts could climb by another 25 basis points if the cash rate were to peak at 4.35% - assuming that all providers pass on another hike to savings customers. 

At the time of publishing, the most competitive savings account interest rate is 5.65% from ME Bank. If another cash rate hike were to occur and be passed on to savers, interest rates of 5.90% could be on the table at the cash rate peak.

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Source: RateCity.com.au. Data accurate as of 28/07/2023. Based on highest ongoing rates on products for all adults. Hypothetical rate hike predictions based on cash rate peak at 4.35% in 2023 and all providers passing on cash rate hikes in full. 

More and more savings account providers may be increasing their savings rates above ‘5’% if another cash rate hike occurs this year. 

And in terms of the value this could bring to your nest egg, if you deposited $25,000 into a savings account with a interest rate of 5.75%, and you didn’t make any extra deposits, after 12 months you would earn an extra $1,476 in interest.

Keep in mind that these figures are based on hypothetical forecasting of a cash rate peak of 4.35% in 2023. These predictions are subject to change. Savers will still need to meet any conditions and eligibility requirements to earn the highest rates.

Savers on track to battle inflation

Australian households have been battling cost-of-living pressures for some time, thanks to higher inflation rates. When savings account interest rates struggle to keep pace with inflation, the value of your savings and your purchasing power decreases.

This month the Australian Bureau of Statistics (ABS) quarterly Consumer Price Index (CPI) indicator revealed that annual inflation increased 6.0% in the twelve months to June 2023. This represented a 1.0% decrease in the pace of annual inflation from March's 7.0% rise, below economists’ forecasts.

The ABS latest monthly CPI data for June also showed that the pace of inflation is slowing by decreasing 0.1% from May figures. And the good news for savers is that the monthly indicator rose by 5.4% in the twelve months to June 2023. 

What this means for you is that if your interest rate is above this 5.4% figure, your savings may be on track to grow at a greater rate than inflation. If inflation continues to fall while the cash rate is kept on pause at 4.10%, savers may continue to come out on top. 

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