Mozo Money Moves: Rate Cut Forecasts Shift as Aussies grapple with ‘Stockholm Savings Syndrome’
Welcome back to another edition of Mozo Money Moves, your weekly wrap where we look at the latest news in banking, and key changes to personal finance products, interest rates, fees and conditions.
This week, CPI data was released that showed inflation is easing, but not as quickly as economists and major banks expected, prompting a shift in rate cut forecasts from major banks.
Mozo also released its latest research report ‘SOS: Save Our Savings’ which showed millions of Aussies could be missing out on higher savings rates due to laziness and loyalty.
Rate Moves
On Wednesday, the Australian Bureau of Statistics released the March Quarter CPI, which shows annual CPI inflation has eased to 3.6%, down from 4.1% in the year to the December Quarter.
The March quarter CPI increased by 1.0% over the quarter, faster than the 0.6% rise seen in the December 2023 quarter, driven by Secondary education (+6.1%), Tertiary education (+6.5%), Medical and hospital services (+2.3%) and Rents (+2.1%).
Looking at inflation over the past three months shows it is not easing as quickly as economists predicted (who forecast a quarterly increase of just 0.8%), driven by sticky services inflation.
However, the midpoint between the December 2023 and June 2024 Reserve Bank of Australia (RBA) CPI forecasts is 3.7%, so an annual CPI reading of 3.6% in the March quarter could be taken as a positive sign that inflation is easing slightly faster than the RBA expected.
Mozo's personal finance expert Rachel Wastell explains what this says about the timing of the first rate cut, and how mortgage holders may not benefit from a mid-year cut, which was previously anticipated.
“After 13 hikes since May 2022, the RBA is set to cut the cash rate when they are confident that inflation will return to the target range of between 2-3%, and although it is in line with the RBA forecasts, shifts to major bank predictions after the release indicate cash rate cuts may not be coming anytime soon.”
“Before the CPI release, some major banks anticipated RBA cash rate cuts as early as September, but this may have been false hope for mortgage holders hoping for rate relief.”
“With inflation not slowing as quickly as major banks’ expected, Westpac has pushed its rate cut forecast back to November, following the October CPI release, and CBA looks to follow suit when they release their preview of the May RBA Board meeting next week.”
Mozo Interest Rate Insights:
- Mortgage holders who compare home loans every six months have an average variable interest rate that is 0.38% lower than those who haven’t.
- Mozo analysis shows the gap between owner occupier and investor home loan interest rates for borrowers paying principal and interest is narrowing.
- Inflation is often expressed as a percentage to show how much the cost of goods and services has changed. Here’s how it works.
Home Loan Moves
This week, there were a few small changes to variable home loan rates, as Macquarie, Suncorp, MOVE Bank, and Illawarra Credit Union made some cuts.
“With the latest inflation data showing a rate cut is not likely to occur within the next few months, the rate moves occurring in the home loan space are likely banks trying to get some attention, or adjustments based on profit margins,” says Wastell.
Illawarra Credit Union made significant cuts to most variable rates, ranging from 0.36-0.60% for Owner Occupier loans and 0.96-1.16% for Investor loans.
Macquarie cut its leading variable rate by 0.01% to 6.14% p.a. (6.16% p.a. comparison rate*) and interest only rates by 0.05-0.10% basis points. Suncorp cut variable special offer rates by 0.05%, now starting from 6.13% p.a. (6.14% p.a. comparison rate*) for the Back to Basics Special for LVRs <60%. MOVE Bank increased variable home loan rates by 0.05%.
Fixed home loans also saw a few cuts, as Bank Australia made 0.10% cuts to 2 year and 3 year fixed rates, now starting from 5.99% p.a. fixed for 2 years (6.16% p.a. comparison rate*).
“If you can afford to refinance to a lower variable rate now, don’t wait around for the first RBA rate cut to do so.”
“Mortgage holders need to prepare for a higher-for-longer rate environment, so for those who can’t afford to refinance, taking advantage of tools like offset accounts can help reduce interest, while waiting for variable rates to fall.”
Lowest Variable Rate Home Loans (with Offset Accounts)
| Lender | Home Loan | Variable Rate (p.a.) | Comparison Rate (p.a.)* |
| G&C Mutual Bank | Essential Worker Home Loan | 5.80% | 5.83% |
| Homeloans360 | Owner Variable Home Loan | 5.89% | 5.89% |
| Tiimely (formerly Tic:Toc) | Variable Home Loan | 5.94% | 5.95% |
| Up | Home Variable Rate | 5.95% | 5.95% |
| The Capricornian | Country to Coast Variable Rate Offset Home Loan | 5.99% | 5.99% |
| source: mozo.com.au as at 26 April 2024, leading variable home loan with offset accounts 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.
Mozo Home Loan Insights:
- The median house price in Australia hits a record high $1.113 million, and a 20% deposit now costs more than two and a half times the median salary.
- 74% of home loan holders think refinancing is too much hassle and it’s easier to just stick with the same provider, but is that truly the case?
- If you’re looking to get a mortgage with one of the Big Four banks, here’s how ANZ, CBA, NAB and Westpac home loan interest rates stack up.
Savings Moves
This week Mozo unveiled its latest research report, SOS: Save Our Savings, which highlighted that Australian savers may be stuck in ‘Stockholm Savings Syndrome’.
Drawing parallels to the psychological phenomenon, the report details the inertia gripping many savers, who remain anchored in familiarity despite missing out on the potential financial gains of exploring alternatives.
"69% of Aussies have never switched savings accounts, despite earning less interest than those who do,” says Wastell.
“It's like we've all got Stockholm Savings Syndrome. The cohort of Aussies who hadn’t switched because they’re happy with their current provider actually had one of the lowest savings rates on average.”
The report analyses responses from a nationally representative survey of over 2,500 Australians and collates data from 232 savings products as part of the Mozo Experts Choice Awards for Savings & Transactions 2024.
Mozo data shows millions of Aussies could be missing out on higher rates due to laziness and loyalty, and how a significant majority of Australians (69%), have never switched savings accounts, despite having less savings and lower rates on average.
Mozo analysis reveals savers who switched accounts in the past year boasted interest rates roughly 1% higher and average balances of $10,000 more than those who had never switched.
Further, Mozo Experts Choice Award winners for High Interest Savings Accounts offered savings rates nearly 2% higher than the Big Four bank averages , urging savers to consider alternatives beyond the big banks.
The report also highlights the importance of understanding bonus conditions associated with savings accounts. Many banks offer attractive introductory rates or bonus interest as incentives for new customers, but these often come with pesky conditions.
According to the Australian Competition and Consumer Commission (ACCC) 71% of bonus interest savings accounts did not meet bonus conditions in the first half of 2023, and failure to meet bonus conditions can result in the forfeiture of bonus interest, and mean savers get as little as 0.00% p.a. Return.
As such, it’s crucial savers look beyond enticing headline rates and review conditions attached to see which savings account is the best for them.
Highest Bonus Rate Savings Accounts
| 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 a 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 26 April 2024, leading ongoing bonus saving rates at $10,000 balance, excluding age restricted accounts. | ||||
Highest Base Rate Savings Accounts
| ADI | Savings Account | Base Rate (p.a.) |
| 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 26 April 2024, leading base saving rates at $10,000 balance | ||
Savings Insights
- One of the easiest ways you can maximise savings is with a high interest savings account, but research shows Aussies have their head in the sand
- The latest research shows Australian savers staying loyal to their current savings provider are lagging behind with the lowest interest rates.
- Ahead of looming rate cuts, term deposit rates have been steadily falling, but interest rates on shorter term deposits remain extremely competitive.
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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