Mozo Money Moves: Expert will be ‘shocked if the RBA moves in March’ despite 428 changes to home loan rates

Welcome back to your weekly personal finance wrap Mozo Money Moves, which looks at the key changes to rates, fees, offers and conditions in personal finance. 

This week, we’ll dive into Mozo expert Rachel Wastell’s predictions for the upcoming RBA cash rate meeting on the 18-19th March, and discuss the latest developments in the personal loans space.

Let’s get into it!

RBA Moves

As the Reserve Bank of Australia (RBA) prepares for its second monetary policy meeting of 2024, all signs point to a hold.

“Looking ahead to the upcoming RBA meeting, there's a strong likelihood of another hold,” says Rachel Wastell, Mozo’s personal finance expert.

“While inflation has not yet reached the RBA’s target range of 2-3%, indicators in spending, borrowing, and employment suggest that 13 rate hikes are having the desired effect of slowing the economy and easing inflation.”

“Although the quarterly CPI released in December showed inflation at 4.1%, the monthly CPI for January slowed to 3.4%, which is very close to the RBA’s target band.”

“I’ll be shocked if the RBA moves in March, but I do think the May and June meetings will be more up in the air.”

“The next quarterly CPI data is due at the end of April, two weeks before the May meeting, so if inflation comes down into that 2-3% range, we could potentially see the RBA cut as soon as the middle of this year.”

Home Loan Moves

Despite a hold from the RBA in February, lenders have continued to shift home loan rates in both the variable and fixed rate space, with Mozo recording 428 rate changes in the first two weeks of March.

275 fixed rate cuts have occurred on the Mozo database since February, compared to just 4 hikes. This is a stark contrast to the changes made to variable rate home loans, where hikes well outweighed cuts, with just 38 rate cuts in comparison to 111 rate hikes.

In the first two weeks of March, 11 lenders reduced fixed rates, with a focus on reductions to rates for 3-year terms. Variable rates have also seen a lot of action in the past two weeks, with dozens of hikes and cuts despite no movement in the cash rate since November last year.

“The fixed rate cuts across the board reflect the market consensus that we’ve reached the peak of the rate hiking cycle,” Wastell continues.

Several lenders, including Bankwest, Heritage Bank, and People's Choice Bank, have lowered fixed mortgage rates. Bankwest cut rates by 30-40 basis points, Heritage Bank and People's Choice Bank cut rates by 20 basis points across 3 to 5-year options, and NAB’s ubank cut by 30-50bps across various terms.

“The sheer number of cuts we’re seeing come through, and that focus on those three year terms, does suggest that the RBA will reduce the cash rate sooner rather than later.”

Mozo Home Loan Insights:

• Will the RBA meeting on the 18-19 March make it the fourth consecutive hold, or are we in for something else? Jack Dona shares the latest.
• New data from the Australian Prudential Regulation Authority (APRA) has found some early warning signs of growing mortgage stress.
• Meet the Robin Hood of home lending, here to help first home buyers break into home ownership by ditching Lenders Mortgage Insurance (LMI). 
• A new home loan package from one digital lender is targeting property investors juggling both an investment home loan and their own mortgage.

Personal Loan Moves

In the personal loan space, the Mozo banking roundup for February 2024 showed dynamics are shifting, with some significant moves including a substantial fee waiver from some of the bigger banks.ANZ waived its $150 loan approval fee, Commonwealth Bank raised rates on its Unsecured Green Personal Loan and Macquarie Bank reduced Car Loan rates by up to 70bps.

There were also some cuts and hikes from smaller lenders, as Defence Bank reduced its Car Loan rate by 59bps, Heritage Bank/People’s Choice lowered its fixed Car Loan rate by 20bps and RAA slashed fixed rates on its Unsecured Personal Loan and Car Loan by 100bps. Gateway Bank took a different route, hiking rates on its Unsecured Personal Loan by 175bps, a notable jump. While interest rates are not as closely tied to RBA cash rate moves as home loans are, and reflect varied strategies among lenders to attract or retain customers, Wastell says there are still some lenders who could cut rates after the RBA cuts.

“The rate changes on personal loan products are more closely tied to the banks’ profit margins and business model, rather than RBA moves, particularly in regard to attracting new cohorts of customers.”

“But that doesn’t mean personal loan rates won’t move when the RBA starts cutting.”

“Borrowers looking to consolidate debt or take out a personal loan could benefit from keeping an eye on what happens to these interest rates when that first cash rate cut does arrive.”

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Mozo Personal Loan Insights:

• Got a short-term home reno project in the works? Money writer Rhianna Dews looks at the pros and cons of personal loans for home renos.
• If you have a major expense to tackle, a personal loan from the bank can help. Here’s how to find out if it’s the right option for you.
• New data shows Aussies are actively looking for better deals and refinancing their loans. But what’s involved in a debt consolidation loan?

Next week, we’ll be discussing the RBA’s cash rate decision for the March meeting, and dive into the details of home loan rates, fees and features, to show borrowers how they can save thousands by taking a closer look at their mortgage.

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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 Round Up here.

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