Mozo Money Moves: Next RBA move still a likely cut as fixed rates hike and savings products plummet
Welcome back to another edition of Mozo Money Moves, the personal finance wrap-up of the week that was.
We saw a fifth cash rate hold this week, tracked a few interesting changes to fixed-interest home loan rates, scooped the low down on why banks are championing bonus savings rates, and even saw some big banks make changes to their term deposit offerings.
Without further ado…
RBA Moves
"...we must continue to be vigilant about the continued risk of high inflation."
The Reserve Bank of Australia (RBA) held the cash rate at 4.35% on 7 May 2024 for a fifth consecutive time, as Mozo experts predicted.
However, the Board recognises inflation is still hanging around like a bad smell, referencing the March Quarter CPI data.
In a statement, the Board said higher-than-anticipated inflation over the quarter means “the economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth.”
RBA Governor, Michele Bullock, told the media:
“Things are pretty bumpy, and I think I have used that term before,” Bullock said.
“Obviously, we try to take a much longer view than just day-to-day, month-to-month, quarter-to-quarter data points but I think what the most recent data do reinforce is we must continue to be vigilant about the continued risk of high inflation.
“I have said before we have made progress here and we’re not going to jeopardise that.”
Bullock also said the Board is prepared to move if it has to, but they believe they can push inflation down into the target range by 2025.
Mozo finance expert, Rachel Wastell, says despite the RBA’s cautious language, it still looks likely the next move will be a cut.
"Despite some suggestions of potential rate hikes prior to the decision, the RBA's statement emphasises vigilance rather than any immediate tightening measures, so it does seem likely the next move will be a cut.”
Mozo RBA Insights
- The Reserve Bank of Australia (RBA) again held the cash rate at 4.35% this week, here’s what it means for your home loan.
- The Big Four banks maintain the next move is a cut, but have pushed back their forecasts.
- Mozo analysis shows Aussies have collectively paid $60 billion more to cover their mortgage since the rate hiking cycle began in May 2022
Home Loan Moves
“Remember, you can use rate moves as ammunition to negotiate better terms on your own mortgage..."
This week in home loans, a few large banks increased fixed rates across various term lengths, with a focus on raising those longer terms, as rate cut expectations shift. However, the chorus of hikes was offset by a few mutual banks cutting fixed rates for their members.
"An RBA cash rate pause doesn't mean home loan rates stand still. Keep a close eye on your rates, as both variable and fixed rates are still shifting,” Wastell explains.
“If you are looking to switch to a fixed rate home loan, just remember that the banks set these rates based on in-depth economic analysis, and that fixing a longer-term rate now could see you miss out later when the RBA cuts the cash rate and variable rates fall in response.”
Fixed rates
Resi and Yellow Brick Road cut rates on 1- to 3-year Select Fixed Home Loans between 0.15% to 0.55%. However, both raised their 4- and 5-year fixed rates by 0.20%.
MyState Bank increased its 2- and 3-year Fixed Rate Loan rates by 0.30% for owner occupiers and 0.20% for investors, and Bank of Sydney cut its fixed rates for investors on the Expect More Home Loan Package on most term lengths by 0.11% to 0.31%.
Joining the fixed rate hike list this week, Southern Cross Credit Union raised its 3-year fixed rates on the Premium Home Loan for owner-occupiers and investors by 0.30%.
Macquarie made a slew of fixed-rate increases on its Basic Home Loan and Offset Home Loan (Package), with all loan terms rising by 0.24% to 0.26%, and Great Southern Bank increased fixed rates across almost all term lengths on its Fixed Rate Loan by 0.25%.
The Your Way Home Loan from Firefighters Mutual Bank, Health Professionals Bank, and Teachers Mutual Bank saw cuts on their 2- to 5-year rates between 0.15% to 0.30%. However, their packaged version, the Your Way Plus Home Loan which comes with an offset account, had some quite sharp increases between 0.50% to 0.80%.
Variable rates
In the variable rate space, Great Southern Bank increased its Basic and Offset Variable loans by 0.5% to 0.39%, the larger of which was passed on to its variable, Interest Only customers. MyState also raised its variable investor loan rates on the Special Residential Home Loan by 0.05%.
As far as special offers go, BankSA and St.George extended their $2,000 cashback offers’ settlement date to 31 October 2024, for those who apply before 30 June 2024.
“If you're not happy with the rate you're on, check if your bank is cutting rates for new customers,” says Wastell.
“Remember, you can use rate moves as ammunition to negotiate better terms on your own mortgage, so make sure you’re checking the lowest rates on offer."
Lowest Variable Home Loan Rates
| Lender | Lowest Variable Rate Home Loan | Variable Rate (p.a.) | Comparison Rate* (p.a.) |
| G&C Mutual Bank | Essential Worker Home Loan | 5.80% p.a. | 5.83% p.a. |
| Homeloans360 | Owner Variable Home Loan | 5.89% p.a | 5.89% p.a |
| Homestar | Star Essentials Home Loan | 5.89% p.a. | 5.99% p.a. |
| Pacific Mortgage Group | Standard Variable Home Loan | 5.89% p.a. | 5.89% p.a. |
| The Mutual Bank | Special Budget Home Loan | 5.89% p.a. | 5.90% p.a. |
| source: mozo.com.au as at 10 May 2024, lowest variable rates for owner occupier, principal & interest home loans in the Mozo database ($400k, <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. | |||
Mozo Home Loan Insights:
- Aussies now pay the equivalent of the Apple CEO's net worth each month to cover their monthly mortgage increases since hikes began.
- We took a second look at how the government’s Help to Buy scheme works, in light of the upcoming Federal Budget 2024-25.
Savings Moves
Savings
In savings moves this week, we saw a bank cut its introductory savings account rate, and a few term deposit rate rises.
Credit Union SA cut the 4-month introductory bonus rate on its Netsave Account by 0.10%, now at 5.30% p.a.
This is reminiscent of a trend that has emerged since RBA rate hikes began, where banks seem more interested in raising bonus savings rates than intro rates, according to Wastell.
“The Reserve Bank of Australia (RBA) has hiked the cash rate by 4.25% over the past two years, however on average, savings rates have only increased by 3%.”
“As banks typically entice savers to deposit cash with special offers, the majority of the 13 RBA rate hikes that have occurred since May 2022 have been passed onto savers through bonus rate and intro rate rises.
“The average intro rate has actually dropped recently, while the average bonus rate has increased – which suggests banks are more focused on bonus rate hikes over intro rates – perhaps because recent research from the ACCC shows 71% of savers don’t meet bonus conditions, so the banks won’t have to pay out a lot of this potential bonus interest.”
Highest Bonus Savings Account Interest Rates
| ADI | Product | Maximum Rate (p.a.) | Base Rate (p.a.) | Maximum Rate Conditions |
| ME | HomeME Savings Account | 5.55% | 0.55% | Minimum $2000 must be deposited into connected SpendME account and have a higher closing balance than the last month. |
| ING | Savings Maximiser | 5.50% | 0.55% | For customers who have an Orange Everyday and in each month deposit at least $1,000 into a personal ING account, make at least 5 settled card purchases using the linked ING debit card and grow the account balance higher at the end of the month (excluding interest) than it was at the end of the previous month. |
| MOVE Bank | Growth Saver | 5.50% | 0.10% | Minimum deposit of $200 and no withdrawals in the month. |
| AMP | AMP Saver Account | 5.40% | 1.2% up to $5,000,000 | Ongoing total variable bonus rate of up to 5.40% per annum applies if customers deposit $1,000 in the previous month. Available only on balances up to $250,000. |
| Great Southern Bank | Goal Saver | 5.35% | 0.50% | Deposit $500 by electronic transfer (excluding telegraphic transfers) into your Everyday Edge Account and make 5 card transactions per month. |
| source: mozo.com.au as at 08 May 2024, leading ongoing bonus saving rates at $10,000 balance, excluding age restricted accounts. | ||||
Highest Base Savings Account Interest Rates
| ADI | Product | Base Rate | |
| Australian Unity | Freedom Saver | 5.20% | |
| ANZ Plus | ANZ Save | 4.90% | |
| Bank of Queensland | Simple Saver Account | 4.85% | |
| Macquarie | Savings Account | 4.75% | |
| Orange Credit Union | Online Saver Account | 4.75% | |
| Unity Bank | MoneyMAX Account | 4.75% | |
| source: mozo.com.au as at 08 May 2024, leading base saving rates at $10,000 balance | |||
Term Deposits
In term deposit rate news, shorter-length TDs are getting all the love this week. The majority of deposit rate increases we tracked went to sub-1-year terms, and even included one of the Big Four.
Bank First raised its 3, 4, 6, 9, & 12-month term deposit rates by 0.10%, taking its 1-year interest rate to 4.85% p.a.
Commonwealth Bank changed its New Deposit Special from a 1-year rate of 4.75% p.a. to an 11-month rate of 4.90% p.a. for those depositing between $5,000 to $2 million. CBA’s 1-year term deposit rate was increased by 0.05%, to 4.10% p.a.
On the other hand, ME bank slashed its 2- to 5-year term deposit rates, which could indicate that the bank wants to push customers towards short-term rates that mature around the time the RBA cuts the cash rate.
ME’s 2-year rate dropped from 4.30% p.a. to 2.00% p.a., and its 3-, 4-, and 5-year rates dropped from 3.50% p.a. to 2.00% p.a.
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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