Mozo Money Moves: Fixed rates rise but Mozo expert “confident RBA’s next move is still a cut.”

image for Mozo Money Moves of RBA Governor Michelle Bullock and graphics representing inflation

Welcome back to another edition of Mozo Money Moves, where we dive into what’s been happening in the world of personal finance.

This week the spotlight falls on the subtle uptick in the monthly CPI data and its potential impact on the direction of the next cash rate decision from the Reserve Bank of Australia (RBA). Murmurs of another rate hike emerged in money markets after the release, but Mozo’s personal finance expert Rachel Wastell remains resolute in her forecast that the next move will be a cut. 

Banks have already shifted back forecasts of when the first rate cut from the RBA will occur, after the March quarterly CPI showed a 1.0% increase over the quarter, which is fueling these rate hike predictions. However, Wastell believes a higher-for-longer rate environment is more likely than another rate hike..

As a result of this shift, there have been a number of lenders on the Mozo database that have increased fixed rates on home loans in May. These hikes are in stark contrast to the flurry of fixed rate cuts lenders made earlier this year when a cut was predicted to arrive in the 2024 September quarter.

Inflation Moves

On Wednesday, the Monthly CPI data was released for April, revealing a slight uptick in the annual headline inflation figure, up from 3.5% in March to 3.6% in April. However, the seasonally adjusted inflation figure held steady at 3.8%, and the CPI figure excluding volatile items and holiday travel remained at 4.1%. 

The slight uptick has sparked speculation that the next cash rate move by the RBAwill be a hike, likely causing anxiety for mortgage holders, but Mozo’s personal finance expert Rachel Wastell says she’s confident the central bank’s next move will be a cut.

“While mortgage holders will need to exercise patience in waiting for a cash rate cut, I’m optimistic the RBA will hold off hiking rates and inflicting any more pain on borrowers unless absolutely necessary.” 

“I am confident the RBA’s next move is still a cut, but I don’t think that relief will come until 2025. I do, however, think the RBA may hint to a rate hike soon, just to ensure that borrowers keep a lid on discretionary spending,” Wastell says. 

“Even though the monthly CPI data has edged up, the quarterly release at the end of July is a more reliable dataset and as most of the pressure on inflation is coming from unavoidable expenses, I doubt the RBA will be jumping to hike in June before the quarterly CPI is released. ”

Westpac Chief Economist Besa Deda recently shared sentiments that align with Wastell’s comments, about the weight of quarterly inflation data compared to monthly CPI data on the RBA’s decision, highlighting how essential expenses have driven this slight uptick in inflation. 

Shared by Deda on LinkedIn on Thursday, the below graph shows the annual inflation rate of discretionary spending has already fallen into the RBA’s target band of 2-3%, a key reminder that it is these unavoidable expenses that remain the key inflation drivers. 

Image of CPI that shows inflation on discretionary spending has fallen within the RBA target band

“Borrowers need to prepare for a higher-for-longer rate environment, and as essential expenses continue to put pressure on household budgets, there’s never been a better time for Aussies to review their budgets and get savvy with their spending.”

Savvy spending insights

Home Loan Moves

With the predictions of a cash rate cut from the RBA shifting backwards, lenders have been responding by pushing fixed rates higher this month, bucking the trend of cuts we saw earlier in the year, when an RBA cut was predicted for 2024. 

In May, Bank Australia raised its 1 and 2-year fixed rates by 0.15%, HSBC increased rates across all terms by 0.20%, except for the 4-year option, which saw a hike of 0.30%, and Great Southern Bank implemented a uniform increase of 0.25% across all terms. 

Macquarie followed suit in increasing rates for most fixed term borrowers by 0.26%, ME increased owner-occupier fixed rates by 0.15% - 0.25% for various terms, and Teachers Mutual Bank increased packaged fixed rates from 0.50% to 0.80%, with a focus on increasing those shorter terms. 

“These fixed rate increases reflect a shift in the market, and a consensus that an RBA rate cut is not coming anytime soon,” explains Wastell.

“As essential expenses keep climbing, and borrowers face this higher-for-longer rate environment, it’s crucial to find ways to cut the cost of mortgage repayments,” stresses Wastell. 

“If you have a variable rate mortgage and you’re unable to refinance, keeping your savings in an offset account or getting your paycheck deposited into your offset account and using this as your everyday account could help reduce the interest you pay.”

“For those who can meet serviceability buffers and afford to refinance, there are still several competitive variable rate home loan options on the Mozo database with rates below 6%.”

“Even those refinancers who don’t want to switch to a smaller lender, and have a preference for the Big Four, could still save if they opt to go digital.” 

This week the Commonwealth bank launched its new Digi Home Loan for refinancers offering rates starting from 6.15% (6.28% comparison rate*) for those with LVRs under 60%, and while this is higher than the lowest rates on the Mozo database, it still sits below the average variable home loan rate of 6.73%p.a (based on a $400,000 owner occupier loan paying principal and interest with 60% LVR accurate 31 May 2024).


Home Loan
Variable Rate (p.a.)
Comparison Rate (p.a.)*
G&C Mutual Bank
Essential Worker Home Loan
Owner Variable Home Loan (Plus)
Pacific Mortgage Group
Standard Variable Home Loan
The Mutual Bank
Special Budget Home Loan
Variable Home Loan
source: as at 31 May 2024, 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.

Home loan insights

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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