Customers can lock away portions of funds in their savings account and receive a 35 basis point premium on the regular savings account's interest rate, bringing the total interest to 1.35% p.a. when bundled with a Boost Saver account.
This is provided monthly criteria is met - including depositing at least $2,000 into the linked Go transaction account, and making at least five settled transactions.
The new feature essentially means customers can turn their savings account into a mini term deposit.
To access their money again, customers must give 32 days' notice, which begins as soon as they hit the unlocking feature in the Virgin Money app.
Customers can lock away their money for up to five years.
Virgin Money CEO Greg Boyle said this is an innovative feature for savers.
"Customers will be able to switch the feature on and off entirely through the mobile app without the hassle of opening or closing an account," Mr Boyle said.
"We’re meeting real, unmet needs, and that excites me. It’s also the latest piece in delivering on what we know our customers, and more broadly Australians want."
Customers can lock away savings in one or more of up to nine Grow Saver or Boost Saver accounts up to the value of $250,000.
They can also continue to grow their savings while it's locked.
"There’s also a huge benefit in having multiple accounts, because we know customers want to lock away money for a long-term savings goal like a home, but also keep other savings accessible for more short-term goals or emergency funds," he said.
Mr Boyle also said the locking feature might suit a younger crowd.
"We know it’ll be extra appealing to millennials and Gen X who are not typically drawn to traditional term deposits, but instead want a simple, fast and flexible way to put money safely aside to save for something special," he said.
Chasing interest rates amid an impending RBA hike?
All of the big four banks and their teams of economists have pencilled in May or June for an RBA cash rate hike.
Today Westpac chief economist Bill Evans forecast the RBA will hike at next week's monetary policy meeting by 15 basis points, followed by a further 25 basis point hike in June.
AMP Capital chief economist Dr Shane Oliver called on the central bank to be aggressive and hike by 40 basis points next week instead.
Many term deposit rates have already moved sharply upwards, however thus far savings accounts have hemmed and hawed.
Just this morning Judo Bank increased its at-maturity 5 year term deposit by 60 basis points to 3.75% p.a.
This is already nearly double the rate it was about six weeks ago.
All of this begs the question: Should savers lock away money now or wait to see what happens after the RBA hikes the cash rate?
Many banks will not hesitate to pass on the rate hike to mortgages in full, but it remains to be seen what could happen to deposit rates.
See Also: What happened last time the RBA hiked the cash rate?
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Denise Raward
Brooke Cooper
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