Mozo Money Moves: RBA hold sparks Big Four split as rent-vestors boom
It was another massive week in finance at Mozo this week.
The Reserve Bank of Australia (RBA) announced their fifth cash rate decision of 2024, where they held the cash rate once again at 4.35%, amid increasing concerns about the direction of the global economy. After the announcement, Westpac revised its cash rate cut forecast , leaving the Big Four split, and the Commonwealth Bank the only Big Four bank to predict a rate cut in 2024.
There was also the announcement of a closure of a once popular home loan franchise, a few cuts and hikes across fixed and variable rate home loans, and the Commonwealth bank removed its unsecured personal loan application fee for new borrowers until 10 October 2024 , following a similar offer on its secured loan fee introduced in June, which ends 27 August 2024.
Additionally, Mozo released new research that showed in this higher-for-longer rate environment there has been a dramatic shift in first home buyer behaviour, and Mozo analysed 185 policies to find Australia’s Best Pet Insurers in the Mozo Experts Choice Awards for Pet Insurance.
RBA Moves
On Tuesday, the RBA decided to hold the cash rate steady at 4.35%, citing that while longer-term inflation expectations have been consistent with the inflation target, borrowers should not be expecting a cash rate cut anytime soon.
Despite the slight drop in trimmed mean inflation over the June quarter, which we discussed in last week’s column, the RBA did consider another hike, as revised forecasts indicate inflation may not return to the target range of 2–3% until late 2025.
For home loan borrowers, as Mozo writer Jack Dona pointed out, this announcement is bittersweet. While another pause decreases the likelihood of further rate hikes, it doesn't signal that rate cuts are coming anytime soon, which RBA Governor Michele Bullock made clear to point out in the press conference after the announcement.
"Now, more than ever, it's crucial for borrowers who meet serviceability requirements to see if they can provide themselves with their own rate cuts," says Mozo’s personal finance expert Rachel Wastell.
"A home loan is likely the largest debt you will ever take on for the longest period of time. So, when you’re looking at a debt of hundreds of thousands of dollars, you need to keep in mind that even the smallest reduction in your interest rate could save you tens of thousands of dollars over a twenty five year loan term."
Until this week, economists from the Big Four banks were divided on when rates might start to drop. Commbank and Westpac forecasts were suggesting a possible cut later this year, while NAB and ANZ predicted it would come sometime in early to mid-2025. After the RBA hold, Westpac announced they now expect the first cut in February 2025.
This means Commbank is left as the only Big Four bank to predict a rate cut in 2024.
As the RBA statement indicated, “the board will rely upon the data and the evolving assessment of risks to guide its decisions,” so the next few months of data releases will be watched closely by economists, especially the Labour Force data to be released next Thursday.
“The uncertainties around the impact of monetary policy lags means that we are still likely going to be teetering on a “wait and see” balance beam for the near future,” says Wastell.
“Though a cut has not been signalled by our central bank, last Friday’s US jobs data showed that unemployment was rising quicker than anticipated in America, and this has sparked concerns that Australia may not be far behind.”
“In Australia, fewer job vacancies coupled with recent widespread layoffs and redundancies means there will now be many more applicants competing for each position, and as the RBA has a dual mandate of reducing inflation and maintaining full employment, this indicator is one that the RBA will be keeping an eye on.”
RBA Insights
- The RBA held the cash rate at 4.35% on Tuesday, but what caused them to continue their long term hold and did they consider a hike?
- Cash rate decisions can affect everything from the interest rate you receive on savings accounts to the interest rate you pay on home loans. So how often does the RBA meet?
- Official interest rates will come down when inflation reaches the RBA target band of 2% to 3%, but when will that be? Here’s what you need to know.
Home Loan Moves
This week, a household name in home loans closed its doors, with the announcement from RAMS they will “no longer be accepting new home loan applications and RAMS Home Loan Centres will close,” as Westpac aims to simplify its business.
For borrowers with existing RAMS home loans, the announcement made clear these “will remain in place, and customers will continue to access service through the myRAMS app, website and call centre” however new customers have been notified to contact RAMS about their loan applications.
In terms of rate moves, this week was a mixed bag. In the variable rate space, Reduce Home Loans, Regional Australia Bank and firstmac hiked variable rates across multiple products between 1-10 bps, while Aussie and Regional Australia Bank cut rates between 2-9 bps. G&C Mutual also hiked their rate leading Essential Worker Home Loan by 15 bps, which now places Homeloans360 and Pacific Mortgage Group at the top of the variable rate table.
Top Variable Rate Home Loans
| Lender | Home Loan | Variable Rate (p.a.) | Comparison Rate (p.a.) |
| Homeloans360 | Owner Variable Home Loan (Plus) | 5.89% | 5.89% |
| Pacific Mortgage Group | Standard Variable Home Loan | 5.89% | 5.89% |
| The Mutual Bank | Special Budget Home Loan | 5.89% | 5.90% |
| Community First Bank | Basic Variable Home Loan | 5.94% | 5.99% |
| Tiimely | Variable Home Loan | 5.94% | 5.95% |
| source: mozo.com.au as at 9 August 2024, leading variable rates for owner occupier, principal & interest home loans at $400,000, 80% LVR. | |||
| WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years. | |||
In the fixed rate space, Regional Australia bank made a number of cuts and hikes to various fixed rate terms for owner occupiers and investors across a range of LVR tiers, Newcastle Permanent cut a number of fixed rate terms, all by 10 basis points, ME bank cut a number of products for owner occupiers and investors between 20 and 55 bps and loans.com.au and firstmac hiked a number of fixed rates between 10-20 bps.
“The adjustment of rates this week was minimal, however it just goes to show that just because the RBA isn’t moving doesn’t mean your bank won’t,” stresses Wastell.
“If you don't know your home loan rate or don’t check that when making your monthly home loan repayment, take this as your sign to do so.’
Home Loan Insights
- According to Mozo analysis, mortgage holders with the big four banks could be paying up to $79,916* more over the life of their loan compared to those who switch to a leading digital lender.
- When a bank calculates your home loan serviceability, they look at your income and expenses (among other factors) to see how much you can afford to pay, here’s how it works.
- Your mortgage can end for a few reasons – when you’ve paid it off in full, you’re refinancing to a new lender or you sell your property, but what happens when it ends?
First home rent-vestor boom
Despite the economic uncertainty surrounding the cash rate, Australian residential property prices are continuing to climb in many states. This means new buyers are taking on larger mortgages than ever before, reducing the borrowing power of those already struggling to meet serviceability requirements of much higher interest rates, when compared to previous buying cohorts.
In light of this, Mozo undertook analysis of the latest Lending Indicators data to release new research detailing the boom in first home rent-vestors.
“Since the ABS started tracking first home investor data in 2019, there’s been a significant shift in the number of Aussies choosing to invest in their first property, rather than live in it,” says Wastell.
“Soaring property prices and high rates are influencing new buyers' strategies, and while lightyears away from dominating the first home buyer market, this small cohort of investors is growing.”
In 2019, first home buyers who chose to invest in properties rather than live in them, represented 5.54% of the first home buyer market. Mozo analysis of the latest ABS Lending Indicators data showed in the first half of 2024, a whopping 4,188 Australian first home buyers chose to invest rather than buying a home to live in, accounting for 6.85% of the total first home buyer market, an increase of 25% in just five years.
Mozo analysis of the first home investor data showed certain states have a much larger cohort of first home investors than others, but all are growing in number in comparison to five years ago, barr Victoria which has slightly declined since 2022.
Australia’s Best Pet Insurers
This week we also revealed the best value and highest quality pet insurers in Australia. Mozo experts reviewed 185 different pet insurance policies from 32 insurers, looking at both dogs and cats, young and old, across different breeds to find the most affordable policies and the policies with the best benefits regardless of price.
“Pet insurance policies can be difficult to compare due to the complexities in the various types of policies available, the sheer number of insurers on the market, and because each policy is priced based on a pet’s risk profile,” said Peter Marshall, Mozo Experts Choice Awards Judge.
“With the cost of insurance on the rise, it’s never been more important for Aussie pet parents to review pet insurance policies, to make sure they’re not paying more than they need to,” says Marshall.
This year, the standout provider and winner of the prestigious Australia’s Best Pet Insurer title was petinsurance.com.au. As the only provider to take out award wins across both Exceptional Value and Exceptional Quality categories for four policies, they have the unique potential to offer Aussie pet owners both competitive pricing and comprehensive coverage.
“It’s rare to find insurers that can provide affordable policies with high quality coverage and generous benefits, but petinsurance.com.au is doing just that,” said Marshall.
“This is the second consecutive year petinsurance.com.au has taken home the top accolade, proving they really are the top dog when it comes to pet insurers.”
See the winners list in full and find out how Mozo experts crunched the numbers.
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.
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