Retirees and young people saving for their first home are struggling with the current low interest rates. And, as data from the Reserve Bank of Australia shows, deposit rates from banks have been gradually dwindling in response.

But the last official cash rate cut by the RBA was in August of 2013. This means the banks lhave been (and are) lowering their deposit rates simply to pad their own profits.

Bonus savings account interest rates have dropped on average 0.5 per cent to 3.55 per cent. The rhree-month term deposit rate has fallen 0.4 per cent to 2.75 per cent. And the deposit rate for a one year term deposit has skydived by 0.3 per cent to 3.2 per cent.

For people relying on this interest as income, this is bad news.

Many have begun looking around for other, higher performing investments. But with higher return comes higher risk, and those unfamiliar with the investment environment risk losing everything. The RBA has chosen to keep interest rates stable. However many economists believe there may be one or two further cuts in 2015.

These cuts would benefit those already with a loan, but be another nail in the coffin of hope for savers and retirees.

This is interesting when you consider that savings accounts hold almost 25 per cent more cash ($1250 billion) than home loans ($927 billion).

A 0.5 per cent interest rate cut takes $50 a year out of an account of $10,000. It’s no wonder then that retirees are being hit the hardest. However, they are being warned to be very careful before selecting other investment options … especially those recommended by a financial adviser.

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