Mozo Money Moves: Rate cuts coming in thick and fast on TDs as Westpac slashes fixed rates

Mozo Money Moves is coming to you a day early after a massive week crunching the numbers.

As the banks become more confident the next move from the RBA will be a cut, our team noticed some cuts to fixed rate home loans and term deposits. Westpac joined NAB as the second big four bank to cut fixed home loan rates this year with significant reductions for borrowers across all LVR tiers and borrower types, and in the savings space a number of term deposit rate leaders made cuts that shifted the rate leader tables.

It was also the week we released our 10 year analysis of the credit card market that our team has been working on for some time now, that revealed Aussies are spending savvier as they reduce balances accruing interest and spend less per purchase. The analysis also highlighted a clear polarisation in credit card rates, likely impacted by the fact BNPL is growing in popularity.

Time to dive in!

Term Deposit Moves

This week changes in the Mozo database indicated it’s not just fixed rates dropping, but term deposit rates are also starting to shift, and the rate leader table is experiencing a shakeup.

This week AMP Bank, NAB, ANZ, Heartland Bank, Judo Bank, ME Bank, Bank of Sydney, G&C Mutual, ING, Auswide Bank, Gateway Bank, Bank of Us, Geelong Bank and Goldfields Money all cut between 5-80 bps off various term deposit rates. 

ANZ was the provider that cut by a whopping 80 basis points, on its 11 month rate, while NAB cut its 3, 4 and 5 year terms by 50 basis points. Last week, the Commonwealth Bank also made huge cuts to term deposit rates, taking 60 basis points off the 1 year and 40 bps of its 5 year terms. 

These cuts are not just notable due to the fact the Big Four are taking part, but what’s interesting is that most of the cuts coming through are from term deposit rate leaders, and have in turn shifted rate leader tables.

“The cuts indicate that term deposit rate leaders are reacting swiftly to pull back on the top rates ahead of the first RBA rate cut expected later this year or early next,” says Marshall.

“The term deposit market is currently in flux, which means rate leaders today may not be the leaders tomorrow, and if you do have a chance to lock away your savings at a high rate above 5% you may want to look into doing so before further cuts materialise.

Before the cuts, Heartland had the leading 1 year rate at 5.30% p.a., and Judo Bank also sat in fifth place on the 1 year rate leader table until cutting by 5 bps on Wednesday. However, after a number of cuts have come through from G&C Mutual, ING, Judo Bank and MOVE Bank there is now a second place tie. There are now 10 providers in equal second place with a rate of 5.00% for 1 year term deposits.

Illawarra Credit Union, which has not changed its rate since adding 85 bps to its rate on 12 July 2024, is now at the front of the pack and the new rate leader as of Thursday 22 August 2024.

1 Year Term Deposit Rate Leaders

The longer terms have also experienced some shifts when it comes to rate leaders, though not as extensive as the one year rate table shakeup. Rabobank had the leading 5 year rate at 5.10%, but is now second with a rate of 4.60% p.a. Judo Bank had the leading 2 year rate at 5.00% p.a., to lead with G & C Mutual at 4.85% on Monday, but G&C Mutual has since cut 25 bps of its 2 year rate and 5 year rate, which has dropped them out of the rate leader tables altogether.

2 & 5 Year Term Deposit Rate Leaders

Term Deposit Insights

• Term deposit interest rates are being cut at a noteworthy level this month and the question for would-be savers surely is, why?
• Thinking about putting your money in a term deposit? While these accounts can offer stability, they also come with certain limitations. Here are the pros and cons.
• If you're considering a term deposit, it's important to understand how the interest you'll earn is affected by tax, as earning interest does come with tax obligations.

Home Loan Moves

On Wednesday Westpac cut fixed rate home loans by up to 80 basis points, coming soon after NAB cut its three year fixed rates by 60 basis points at the end of July. 

When looking at a 70% LVR, Westpac cut discount packaged fixed rates for 1-5 year terms, cutting the 1 year by 50 bps to 6.09%p.a. (7.62%p.a. comparison rate*), 2 years by 60bp to 5.89%p.a. (7.45%p.a. comparison rate*), 3 years by 70bp to 5.89%p.a. (7.32%p.a. comparison rate*), 4 years by 70bp to 5.89%p.a. (7.19%p.a. comparison rate*) and 5 years by 80bp to 5.89%p.a. (7.08%p.a. comparison rate*).

Westpac’s 1 year fixed rate for new borrowers with either a 30% deposit or existing borrowers with an LVR of 70%, is now its only discounted fixed rate above 6%. This puts them in the lead when looking at fixed rate home loans from the Big Four Banks in that borrowing space. The discounted package rates from Westpac however do charge an annual fee, so if borrowers are looking to switch to one of these new fixed rates starting with 5, they should keep that in mind.

"As fixed rates continue to drop below that 6 percent mark, they’re becoming more appealing for mortgage holders,” says Mozo banking and rates expert Peter Marshall. 

“However, it’s important to think about whether locking in a rate now is the best move, especially with the RBA likely to lower the cash rate within the next 12 months."

Big Four Bank Fixed Rates (70%LVR)

"Fixed rates are shaped by lenders’ forecasts of where interest rates are headed. Since these rates stay the same for the fixed rate term, and banks aim to balance the returns from loans with the cost of deposits, there’s a chance fixed rates will be higher than variable when the cash rate drops.”

 

“Choosing a fixed rate today could be tempting, but borrowers should also consider the likelihood of upcoming rate cuts by the RBA before making their decision."

It’s not just Westpac cutting fixed rates. As we mentioned in this column last week, fixed rate cuts have already started to come through from a  number of lenders including NAB, Macquarie Bank, Bank of Queensland, and MOVE Bank. 

CBA and ANZ have yet to move their fixed rates down in 2024, but with CBA the only big four bank still predicting an RBA rate cut in 2024, it's possible they’ll start cutting fixed rates soon.

Home Loan Insights

• Westpac’s newly reduced interest rates come less than a month after NAB ended the stalemate and cut its fixed rates, but what does that mean for borrowers?
• With a number of new housing developments in motion, you may consider buying off the plan. If it’s something you’re looking into, you should read this first.
• Whether you’re planning to buy with friends, your partner, or a sibling, sharing a home loan can help you cut down on costs and increase your borrowing power, but how does it work?

* 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.

10 Year Credit Card Analysis

This week, Mozo also released an in-depth 10-year analysis of credit cards that revealed Aussies are becoming savvy credit card spenders, as they reduce debt and make smaller, more manageable transactions.

As a result, this has prompted a shift in the purchase rates available to consumers as banks attempt to recoup lost interest revenue.

Here’s a quick overview of what we found:

• Savvier Spending: Average domestic credit card purchases have decreased by 23%, from $118 in 2014 to $90 in 2024`
• Reduced credit card debt: Balances accruing interest have dropped by 45%, from $31.8 billion to $17.5 billion`
• More low and high rates: Mid-range credit cards (10-15% p.a.) have declined by 57%, while low-rate (1-10% p.a.) and high-rate (20%+) cards have increased.
• Rising annual fees: The average annual fee has risen by 25%, from $111.55 to $134.76, with 
• the highest fee nearly doubling from $700 to $1,200.
• Impact of BNPL: Mozo research^ shows 54% of Aussie credit card holders have a BNPL account, so there is a risk that debt is not being reduced, just repositioned into BNPL.
• BNPL debt: Mozo research from earlier this year* showed the average outstanding BNPL debt is $919, and Aussies with multiple accounts owed up to $1,766.

If you’d like to look at the analysis in more detail, you can read it 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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` RBA Retail Payments Data June 2024 (released August 2024)

^Mozo.com.au commissioned a nationally representative survey of 2,129 Australians aged 18 years and over, with information collected between 19 July and 5 August 2024  via Researchify.

* Mozo commissioned a nationally representative survey of 2,554 Australians, aged 18 years and over, from 12th January to 2nd February 2024.