Mozo Money Moves: AUD dives, rate cuts ramp up, and the best Travel Insurers
![image of cliff diver to represent both AUD diving to a low level and also the Mozo Experts Choice Awards best travel insurers announcement](https://cdn.mozo.com.au/images/atwood/18097/Mozo%20Money%20Moves%2017%20Jan%202025%20=%20%20AUD%20dives,%20rate%20cuts%20ramp%20up,%20and%20Australia’s%20Best%20Travel%20Insurers.png)
Welcome back to Mozo Money Moves, your weekly wrap of rate changes and financial insights, keeping you in the loop on what's been happening and how it might impact your wallet.
This week, the long-awaited Labour Force data was released, which is likely to play a key role in the next Reserve Bank of Australia (RBA) cash rate decision. For mortgage holders waiting with bated breath for a rate cut, this data will certainly be under the microscope.
Mozo also revealed the winners of the Mozo Experts Choice Awards for Travel Insurance 2025, and there were some notable changes to home loan and deposit rates.
Let's get into it!
Banks start shifting term deposits and fixed rates
Although the year got off to a slow start in terms of interest rate changes, the pace of rate movements on the Mozo database has certainly picked up over the last few days. We’ve seen banks start to adjust interest rates, which depositors and home loan holders should be keeping an eye on.
Six tied rate leaders in home loans
Australian Unity and The Capricornian may have been the only banks to cut variable home loan rates this week, but one of the moves has increased the number of rate leaders to six.
Australian Unity cut its Health, Wealth and Happiness variable rate home loan by 15 bps, but still offers rates above 6%. However, The Capricornian made a huge cut of 90bps, which has pushed it into the ring of rate leaders offering headline rates of 5.89%p.a. The Capricornian’s comparison rate* of 5.93% p.a. means it is now the third leading rate when accounting for comparison rates.
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% |
The Capricornian | No Frills Home Loan | 5.89% | 5.93% |
Police Credit Union | Low Rate Home Loan Special Offer | 5.89% | 5.95% |
Queensland Country Bank | Ultimate Home Loan Special (Package) | 5.89% | 6.24% |
source: mozo.com.au as at 17 January 2025, leading variable rates for owner occupier, principal & interest home loans at $500,000, 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 |
Fixed Rates Drop
The Capricornian, G&C Mutual Bank and Queensland Country Bank all cut fixed rate home loans for owner occupiers this week, with a focus on 1-3 year terms.
The Capricornian cut its Fixed Premium Choice Home Loan for the 1 year term by 25 bps for borrowers with LVRs over 80%, 15 bps for its 2 year terms, and took 38 bps off its 3 year term for borrowers with less than 80% LVR. It also cut a whopping 58bps of its 3 year term for borrowers with more than 80% LVR.
The Capricornian was already leading for LVRs <80%, but have now joined the rate leader pack for 90% LVRs for 1 year fixed rate home loans – offering a 5.74% rate (7.31%p.a. comparison rate*). The regional lender now sits just behind Community First Bank 5.74% rate (6.39%p.a. comparison rate*) and Easy Street 5.74% rate (6.06%p.a. comparison rate*), when ranking based on comparison rates.
G&C Mutual also jumped into a leading fixed rate position this week, cutting its 2 Year Fixed Rate by 25 bps to 5.50%p.a. (5.56%p.a. comparison rate*). It now sits in the top five rates. Queensland Country Bank and The Capricornian were two other banks that moved into the top table, with the banks now sitting in sixth and eighth spot respectively when accounting for comparison rates. Queensland Country Bank cut various 2 year terms by 20 bps and The Capricornian cut by 15 bps.
Top 2 Year Fixed Rates
Lender | Home Loan | 2 Year Fixed Rate (p.a.) | Comparison Rate* (p.a.) |
Easy Street | 2 Year Fixed Home Loan | 5.49% | 6.02% |
BankVic | Optimum Fixed Rate Home Loan | 5.49% | 6.03% |
Community First Bank | 2 Year Accelerator Fixed Home Loan (Special Package) | 5.49% | 6.30% |
G&C Mutual Bank | 2 Year Fixed Rate | 5.50% | 5.56% |
Australian Mutual Bank | Fixed Rate Home Loan (Owner Occupier) | 5.59% | 6.35% |
Queensland Country Bank | Special 2 Year Fixed (Ultimate Package) | 5.59% | 6.46% |
Illawarra Credit Union | The Works Fixed Home Loan (Package) | 5.59% | 6.51% |
The Capricornian | Fixed Premium Choice Home Loan | 5.59% | 7.12% |
source: mozo.com.au as at 17 January 2025, leading 2 year fixed rates for owner occupier, principal & interest home loans at $500,000, 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
Term Deposits follow suit, as CBA offers 8-months special.
Term Deposits were also shifting this week, with a big change from Heartland Bank on an unexpected term, as it increased its 1 month rate by a whopping 2.35%. This is now a leading 4.10%p.a. rate and puts Heartland at the top of the leader board, 30 bps above Goldfields Money.
Other notable changes included the Commonwealth Bank (CBA) and Westpac’s regional brands making changes to special offers on term deposits. CBA switched its 9 month special offer rate of 4.75% p.a. to offer the same rate on an 8 month term and changed some of its other non-special rates, cutting 3, 10, 11, and 12-month terms by 10 bps. CBA also decreased the 9 month non-special rate by 90 bps and increased the 8 month non-special rate by 85 bps.
Westpac’s regional brands; St. George, Bank of Melbourne and BankSA, all removed their 11-month special offer term deposit rate of 4.80% p.a. (4.90% digital p.a.)
There was also significant activity from regional brands and specialists:
- Credit Union SA and Bank Australia both adjusted their 3-month rates. Credit Union SA cut its 3-month rate by 10- 75bps, while Bank Australia increased its 3-month rate by 10bps. Credit Union SA also increased its 4 month term by a hefty 110bps.
- ME Bank, Bank of Queensland (BOQ), Bank Australia and Hume Bank all reduced their 6,9 and 12 month rates by 10-15bps. BOQ Specialist also cut its 12 months rate by 15 bps.
The battle between Judo Bank and Heartland from 2024 continued into 2025 this week, as Judo Bank increased 4 and 5 year terms by 10bps, to jump 5 bps ahead Heartland and take rate leader position for those terms at 4.50%p.a.
Unemployment data divides market expectations for rate cut
Unemployment data is one of the key indicators the RBA looks at when making their cash rate decisions, with a dual mandate of achieving full employment and maintaining price stability. As such, close attention was paid to the Australian Bureau of Statistics (ABS) Labour Force Data for December 2024, which was released yesterday morning.
The slight uptick in the unemployment rate from 3.9% to 4.0% in December caused contention, as while it may appear to signal a cooling labour market, it doesn't necessarily indicate weakness. The data shows more Australians are actively re-entering the workforce, which often occurs when job market conditions are strong.
Recent data from the Job Vacancies Survey for November 2024 shows total job vacancies across Australia increased by 4.2% from August 2024. Private sector vacancies saw a more substantial rise, up 4.7%, while public sector vacancies rose by 0.4%. The fact the unemployment rate has hovered around 4.0% for over a year, coupled with the increase in job vacancies (especially in the private sector) suggests despite a continued demand for workers – the labour market remains tight.
CBA and ANZ set on a February Cut
One bank that has been confident that the Reserve Bank of Australia (RBA) will implement a rate cut in February 2025 since last year is Australia’s biggest home lender, CBA..
Just this week, CBA's Gareth Aird reinforced their stance on a February cut, pointing to the easing wage pressures as a key factor influencing their outlook. Aird noted that the six-month annualised rate of wages growth (3.2% in Q3 2024) is now at “a level we believe is consistent with the (RBA’s) inflation target.” CBA forecasts a 0.5% quarterly trimmed mean CPI forecast for Q4 2024, which they believe “would be sufficient for the RBA to start normalising the cash rate.”
Recently, ANZ also moved its forecast for a rate cut up from May to February, meaning the big four banks are now split down the middle on the timing of the long-awaited first cash rate cut. ANZ downgraded its inflation forecast in light of the weaker-than-expected November CPI results. Previously, ANZ expected trimmed mean inflation to come in at 3.4% for the year, but now forecasts it at 3.2%, a revision that largely reflects lower services inflation, a key concern for the RBA.
However, Birch added a note of caution. “We can’t write off a hold by the RBA at the February meeting, particularly because there is still a bit of resilience in the labour market,” she said. Despite this resilience, ANZ forecasts two 25 bps rate cuts: the first in February and another in August 2025.
Westpac and NAB Remain Cautious on Timing
While CBA and ANZ are leaning toward a February rate cut, Westpac and NAB are taking a more cautious stance.
Westpac continues to see May as the more likely date for a rate cut, although they acknowledge that softer economic data could bring forward a decision. Chief Economist Luci Ellis emphasises that while “there is still a chance the Board cuts the cash rate in February or April if inflation comes in below expectations… on balance, Westpac expects rates to remain unchanged in February.”
Similarly, NAB believes the RBA's strategy will likely focus on minimising any slowdown in the labour market while assessing how far the economy is from achieving balance. NAB forecasts a 0.6% quarterly inflation growth figure, 0.01% higher than CBA’s. While NAB does not entirely rule out a rate cut in February, it maintains that mid-year (May) remains the more likely starting point.
“While recent data is providing some signals about the state of the economy, it’s important to remember that all economic data is inherently backward-looking,” stresses Wastell.
“Data like the unemployment figures or job vacancies can give us valuable insights, but they don't always paint a complete picture of what's happening right now or what will happen in the future.”
“No one has a crystal ball, especially when we're navigating the complexities and uncertainties of a post-COVID economy. Given how unpredictable the economic landscape has been in recent years, it’s understandable why the RBA might choose to wait at least one more meeting before a cut.”
Focus shifts to the December Quarter CPI
As the economic landscape continues to evolve, all eyes will be on the upcoming January 29th December Quarter CPI release. This will be a pivotal moment in the RBA's decision-making process, as the market will be closely monitoring whether the trimmed mean can make it within the 2-3% target band, which could signal inflation is on a sustainable path.
“If the data shows that inflation has remained under control, it could further solidify the case for a rate cut in February, as CBA and ANZ predict,” says Wastell.
“However, if inflation pressures persist or the data suggests that inflation is not yet sufficiently under control, the RBA may hold off on easing policy for the time being.”
“As always, the RBA will continue to assess a range of economic factors, including wage growth, job vacancies, and overall economic activity, but this quarterly CPI read will be a critical indicator for the direction of monetary policy in the year ahead.”
Aussie Dollar Takes a Dive
As if the uncertainty of a long-awaited rate cut weren't enough to worry about, the Aussie dollar is showing signs of weakness, and that could have a big impact on your money. During trading on Monday of this week, the Australian dollar (AUD) fell to its lowest point since 2020 - 61.44 US cents.
The Aussie dollar’s decline against the US dollar has raised concerns that inflation could start ticking up again - but what does this mean for the Reserve Bank’s next decision on interest rates?
“It’s important to note first and foremost that the recent decline in the Australian dollar is more about a strong US dollar than a weak AUD,” says Rachel Wastell, Mozo Money Expert.
"The US jobs market is showing strength, inflation is sticky and this is leading to a view that the US Federal Reserve could hold off on cuts this year. That being said, the Aussie dollar coming under pressure is a bit of a double-edged sword.”
"On the one hand, a weaker dollar can help local businesses by making exports more competitive, but it also means the cost of importing goods goes up, and that could push inflation higher – something the RBA is trying hard to keep in check."
The RBA made it clear in its last monetary policy decision statement that it’s taking a cautious approach when it comes to interest rates, wanting to see inflation moving sustainably toward the target before easing back - key word, sustainably.
The September Quarter CPI read released in October showed headline inflation at 2.8% and the annual trimmed mean at 3.5%, This was down from a 3.8% headline figure and 3.9% trimmed mean figure for annual inflation in the June quarter.
While headline inflation did reach that 2-3% target band last quarter, and monthly CPI headline inflation figures since September last year have shown 2.1%, 2.1% and 2.3% consecutively, the trimmed mean figure is yet to drop within that target band.
“With the AUD volatility and the tight labour market, a quarterly CPI read of 3.2% may not be enough to convince the RBA it's sustainably within target. They may want to see at least one trimmed mean inflation read between 2-3% CPI to make sure.”
Mozo reveals the best travel insurers for 2025
The latest Overseas Arrivals and Departures data, released this week by the ABS, highlighted the increasing popularity of international travel among Australians, despite the rising cost of living.
In November 2024, 912,430 short-term resident returns were recorded, adding an additional 91,670 trips compared to the same month last year, and jumping 7.4% compared to pre-COVID November 2019 levels. Indonesia topped the list of destinations, accounting for 15% of all returns with 134,950 trips, followed by New Zealand (113,590 trips) and Japan (72,060 trips).
However, travelers may find their holiday budgets stretched as the Aussie dollar weakens.
“A weaker Aussie dollar can mean higher costs abroad, making budgeting even more crucial,” says Wastell. “If you’re planning a trip and concerned about exchange rates, one way to free up some cash is by saving on your travel insurance.”
On Thursday, Mozo announced the winners of the Mozo Experts Choice Awards for Best Travel Insurers, spotlighting the insurers offering Exceptional Value and Exceptional Quality policies, after the analysis of 166 different travel insurance policies from 51 insurers.
"The Mozo Experts Choice Awards winners list can help travelers see if they're getting the most bang for your buck – and cut costs on their travels to accommodate some of the impacts of a weaker Aussie dollar.”
The 2025 awards spotlighted stand-out providers like Travel Insurance Saver, named Australia’s Best Travel Insurer, and Butter Insurance, awarded Highly Commended Travel Insurer.
Check out the full winners list here or read the media release.
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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Disclaimer: Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice. Target Market Determinations can be found on the provider's website. While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.