National Australia Bank (NAB) has become the second of the big four banks to cut its savings interest rates, delivering a significant blow to depositors just days after the Reserve Bank of Australia (RBA) announced a reduction in the official cash rate.
NAB lowered rates on its Reward Saver and iSaver accounts by 25 basis points, with returns now at 4.4% and 4.65% respectively. This move comes amid broader market expectations of continued rate cuts through early 2026.
Westpac was the first of the big four to act, cutting savings rates by the same margin—also 25 basis points—four days before adjusting mortgage rates. Industry analysts warn this could be the start of a wider trend, with more banks expected to follow.
The RBA’s latest decision brought the cash rate down from 4.10% to 3.85%, marking the second rate cut in the current cycle, following a similar reduction in February and a pause in May.
Savers See Returns Shrink as Market Adjusts
Sally Tindall, research director at Canstar, described NAB’s move as “just the tip of the iceberg” for Australian savers. She noted that it’s become common for banks to cut savings rates ahead of mortgage rates, impacting customers who rely on deposit interest. “It’s disappointing to see some banks chop savings rates ahead of their mortgage rates,” she said. “One day, it would be fantastic to see a bank reverse this order.”
Tindall also highlighted that the era of savings rates starting with a five may soon be over, with the highest offers shrinking rapidly. Macquarie Bank, for instance, now offers an ongoing rate of 4.50% with no monthly conditions—a figure that could soon stand as one of the best in the market, once all banks adjust post-RBA rate announcements.
RBA has officially CUT rates by 0.25%.
— Mickamious (@MickamiousG) May 20, 2025
NAB is the First of the Big 4 to slash rates by the Full amount.
Australians have been warned not to potentially see another Rate Cut this year due to the Global Outlook and that the RBA will remain 'prudent' – Relating to bond markets pic.twitter.com/yF8zT0RNpx
Broader Economic Implications and Forecasts
NAB’s decision is in line with forecasts predicting that the cash rate could fall to 2.6% by early 2026, as stated by NAB CEO Andrew Irvine. He described the current period as one of economic uncertainty, citing global instability but expressing confidence in Australia’s economic fundamentals.
“We enter this period of instability in a strong position,” Irvine said. “We have unemployment that’s very low. I believe we will see three or four base-rate reductions that will stimulate the domestic economy.”
The RBA’s current easing path reflects its broader effort to manage inflation and support growth. Market analysts now expect at least three more rate cuts before February 2026, and NAB itself had previously forecast as many as five. While these changes could offer relief to mortgage holders, they come at a cost to savers, who continue to face diminishing returns.
Pressure Builds as Smaller Banks Also Move
A number of non-major banks, including Macquarie, have already begun adjusting their savings rates. Consumers with funds in traditional savings accounts are encouraged to monitor their rates closely, as smaller institutions may offer more competitive options amid the shifts.
As banks move to realign their borrowing and funding costs, the balance between rewarding savers and supporting borrowers remains a point of friction. With the RBA’s rate adjustments now triggering rapid responses across the sector, both depositors and borrowers are bracing for further changes in the months ahead.
