Mozo Money Moves: CBA changes forecast, ANZ cuts again and deposit rate leaders shift

Welcome back to Mozo Money Moves, your weekly finance wrap which dives into the latest pricing changes in the Australian retail banking landscape. 

This week we look at the second round of fixed home loan rate changes from ANZ in just three weeks, as the bank cut rates for lower-risk borrowers and hiked rates for higher-risk borrowers. 

We also discuss the September Quarter inflation data that will inform the Reserve Bank of Australia (RBA)’s cash rate decision next Tuesday, and prompted Commbank on Thursday to revise their rate cut forecast, Despite the headline inflation figure dropping into the RBA’s 2-3% target band, the trimmed mean remains sticky.

Mozo also released its Banking Roundup for October 2024, which dives into the key changes made by Australian banks and lenders over the past month. Along with the flurry of term deposits and fixed rate cuts we’ve been tracking in this column, there were also some interesting moves in the personal loans and credit cards spaces.

Time to dive in!

Lending Indicators show First Home Buyers continue to struggle

Today, new Lending Indicators data from the Australian Bureau of Statistics (ABS) revealed that the number of new loans approved has risen for both owner-occupiers and investors over the past 18 months. Driven in part by a surge in investor loans, the ABS notes this is likely credited to the recent increases in house prices and attractive rental yields.

However, it’s not all good news.

When looking at the first home buyer data, the number of new owner-occupier first home buyer loans dropped by 3.2% in September to 9,686. Although still 2.0% higher than September 2023, the decline reflects the ongoing struggles faced by first home buyers, as rising property values and high-interest rates make it difficult to enter the market - especially when to save a 20% deposit you need at least six figures in savings.

The lending indicators also showed the total value of new personal fixed term loan commitments rose for the second month in a row. In September, it increased by 2.1% to $2.8 billion. This was up 16.1% from a year ago, and followed a 2.1% rise in August.

Inflation dips below 3% prompting Commbank to shift its forecast

On Wednesday, the latest quarterly inflation data showed prices have risen across all items in the Consumer Price Index (CPI) basket in the three months to September by 0.2%. This has resulted in an annual inflation rate of 2.8%, a drop from the 3.8% seen in the June quarter. Notably, this is the lowest annual inflation rate since March 2021, signalling some easing in the overall cost of living. 

However, the trimmed mean annual inflation rate, which excludes extreme price changes like the falls in Electricity driven by government rebates, remains at 3.5%. This is above the RBA's target of 2-3%. 

So, despite price drops in key areas like electricity and fuel, underlying inflation is proving harder to bring down, which you can see in the table below.

The persistence in trimmed mean inflation also prompted Commbank to revise its interest rate forecast. Originally expecting a December 2024 rate cut, Commbank now anticipates the RBA will hold off cutting the cash rate until February 2025, aligning with the outlook of economists at the other three Big Four banks; ANZ, NAB, and Westpac.

According to Commbank’s analysis, the slower-than-expected disinflation suggests that inflationary pressures, particularly in the services sectors, may continue longer than they previously thought. As a result, any cash rate decisions from the RBA are likely to be conservative until that underlying inflation measure (the trimmed mean) clearly settles within the target range.

"While it's encouraging to see inflation drop below 3 percent, the sticky trimmed mean inflation highlights that underlying cost pressures remain,” says Rachel Wastell, Mozo’s personal finance expert.

"The slower than expected disinflation indicates that borrowers should stay cautious, as the RBA is likely to approach any future rate cuts conservatively.”

“While there's potential for relief in the new year, borrowers shouldn't bank on it just yet—keeping a close watch on those core inflation figures will be essential."

ANZ Cuts Fixed Rates Twice for Lower-Risk Borrowers

On Monday, ANZ made a strategic move to capture lower-risk borrowers by reducing fixed rates for borrowers with a Loan-to-Value Ratio (LVR) of 80% or less. This is the second time ANZ cut fixed rates in October, after cutting fixed rates for all borrowers just three Fridays ago. 

“For homeowners who have built significant equity, this brought a welcome opportunity to lock in lower rates in an uncertain market,” says Wastell, “as the 2 and 3 year fixed rates inch ever closer to the five and a half percent mark.” 

Owner Occupier (Principal & Interest - LVR ≤ 80%)

For borrowers with LVRs of more than 80%, however, there were no further cuts. In fact, ANZ removed the 15bps discount previously attached to these loans, raising these fixed rates for borrowers with less than 20% equity. 

As Mozo shared last week, it’s already extremely difficult for borrowers with less than 80%LVR in the current market due to the high cost of Lenders Mortgage Insurance (LMI) - and ANZ's removal of the discount for higher LVR borrowers adds yet another barrier.

“ANZ’s decision to cut fixed rates again looks like a strategic play to secure lower-risk borrowers in an uncertain environment. For those with less than 80 percent LVR, the news isn’t as positive, as it adds yet another hurdle in an already challenging market.”

“Given these changes, now may be a wise time for borrowers with less than 80% LVR to explore alternatives outside the Big Four, as even a small rate reduction can lead to significant long-term savings. 

Rate Leaders Shift Savings Rates Ahead of RBA Decision

The anticipation of a pause from the RBA has also influenced some rate leaders in the at-call deposit space this week to make cuts to previously leading rates. 

ME Bank was leading with the highest ongoing conditional bonus savings rate on its HomeME savings account at 5.55% p.a., but this has now been cut by 30 bps to 5.25% p.a.. The highest rate in this savings category is now ING's Savings Maximiser with 5.50% p.a. ongoing conditional bonus rate.

For savers looking to secure high rates without having to meet bonus conditions, unconditional base rates could be a better option, and until Thursday, Australian Unity led the pack with its Freedom Saver account, offering a competitive 5.20% p.a. However, this has now been cut for balances up to $50,000, and sits in line with Macquarie Bank's Savings Account, with both offering unconditional rates of 5.00% p.a. for savers.

“Aussies with their savings in a leading online savings account should be checking their rate to see if it's moved,” stresses Wastell, “especially as we could see more rate leaders shifting rates down as we get closer to an RBA cut.”

Looking at term deposits, which has been moving dramatically over the past few weeks, a couple of rate leaders were making small moves to steal the top spot on the Mozo database.

Gateway Bank shaved 5bps of its 3 and 6 months term deposit rates, keeping its position as the second best rate for 3 months and dropping a place to the third best rate for 6 months. Currently, Judo Bank and Bank of Sydney sit in tied top spot for 3 month terms at 5.00%p.a., while Judo is in the lead for 6 months at 5.10%p.a.

Heartland Bank hiked 6 month, 9 month and 1 year rates for term deposits by 5 bps each, jumping into the top spot for 9 month and 1 year terms. They sit just below Gateway in the 6 month space with 5.04%p.a., tie with Family First for 1 year at 5.05%p.a., and sit alongside Credit Union SA in the 9 month term deposit with a leading rate of 5.10%p.a.

“The term deposit market is on the move, and it’s exciting to see banks actively competing for savers’ attention,” adds Wastell.

“This flurry of activity indicates that lenders are keen to attract deposits, which is great news for consumers - if you have savings to lock away that is.”

Key Banking Changes in October 2024

Each month, Mozo rounds up the notable changes to fees, conditions and rates across key personal finance products, and last month was packed with money moves:

Home Loans

With the RBA holding off rate changes for now, lenders are preemptively adjusting home loan rates. Several top variable rates have dropped below 6%p.a., and fixed rates hover around 5.50%p.a..

• Variable Rates: Lenders like Auswide Bank, HSBC, Hume Bank, and RACQ Bank have cut variable rates, now starting from 5.99%p.a. for owner-occupiers with lower LVRs.
• Fixed Rates: ANZ, NAB, and other major banks have trimmed fixed rates by 30-70 bps, with options around 5.50%p.a. now available for shorter terms.

Credit Cards

• Purchase Rates: Some providers, like American Express and Bank of Queensland, have recently adjusted purchase rates, with options now starting around 13.99% for low-rate cards.
• Balance Transfer Offers: St George Bank (along with BankSA/Bank of Melbourne) is promoting extended 0% balance transfer periods, reaching up to 24 months with one-time fees of around 1-2%.

Personal Loans

• New Green Loans: One lender launched a green loan, reflecting the trend toward eco-focused financing.
• Rate Adjustments: Commbank lowered its personal loan rates, which could stimulate competition as we enter 2025.

Deposits

• At-Call Savings Accounts: Some banks nudged up rates, especially on promotional and bonus accounts, now offering up to 5.00% for customers meeting bonus conditions.
• Term Deposits: ANZ, NAB and Macquarie reduced term deposit rates, with top rates now around 5.15% for shorter terms.

To see the Mozo Banking Roundup in full, click here.

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As a part of Mozo’s commitment to making your money count for more, each month we “roundup” the rate changes, key banking trends and money moves in the Australian personal finance market. 

If you’d like to see the analysis in full once it’s released, you can subscribe to receive the Mozo Banking Roundup here.

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