This is a round-up of rates in July and some may have changed since the time of writing. To check on today’s rates click on the highlighted product.
Interest rates on both loans and deposits were very stable throughout July with little change in average rates across the month. The few providers that did move rates were adjusting their fixed rate pricing in anticipation of the RBA cutting the official cash rate at its August meeting.
The question for many mortgage holders would be whether to it’s better to fix now or remain on a variable rate to take advantage of any further cash rate reductions. Since the start of this year the cash rate has been reduced by 25 basis points. Over the same time the average variable rate has come down 35 basis points, 1 year fixed rates are down 46 basis points, 2 year fixed are down 40 basis points and 3 the average year fixed rate is down 41 basis points, making fixed rates seem like good value.
Right now, the average variable rate for a loan of $300,000 is 5.53% while the average 1 year fixed rate for a loan of the same size is 5.01%. For variable rates to come down to the level that fixed rates are at now would take another two 25 basis point cuts to the cash rate. We may see the first of these as soon as 6 August as the case for a rate cut has been building, but that leaves another cut which may be months away, if it comes at all.
Do a little digging and there are some really competitive rates out there, at levels not seen before. Greater Building Society has just announced a 3.99% fixed rate for one year on its packaged loan, and more than half of the providers listed in the Mozo database have 1 year rates below 5.0%.
All this adds up to a strong argument for fixing now. Just be careful to check whether the fixed rate loan has an offset facility or allows extra repayments if you are looking to pay your loan off faster.
Check out all the home loan rates with Mozo’s Home Loan Compare tool that will help you find the lowest rates for your loan amount and property value.
Conditions have been getting tougher for those with cash in the bank and anyone with a mortgage would almost certainly be better off putting as much spare cash as possible in an offset account to reduce interest being accrued on the mortgage.
For those that don’t have a mortgage it’s worth considering a term deposit even though rates are now quite low.
Like home loans there was almost no movement in rates during July, and what little there was all in the one direction – down.
The best at call savings rates are around 4.75%, but these are usually short-term introductory rates that soon finish, and are variable so can be reduced when the RBA moves or if the banks choose. There is one stand-out ongoing rate on offer – RAMS Saver will pay 4.76% every month you deposit at least $200 and make no withdrawals.
If the RBA does cut once or twice more, the term deposit rates available now could very quickly start looking like a good deal. For a $25,000 deposit more than half of the Mozo database offers rates of 4.0% or more with ME Bank and UBank both offering 4.20%. In contrast, only 20% of the at call savings accounts have rates of 4.0% or more, and that figure will come down quickly if the RBA does reduce rates further.
We may not be at the bottom of the rates cycle yet, but even if there’s another cut or two yet to come from the RBA there’s a case for both borrowers and depositors to consider locking into fixed rates for at least a portion of their finances now.