Mozo Banking Roundup July 2019
Thursday 01 August 2019
A second RBA rate cut in July means there’s plenty of changes to cover in this month’s Mozo Banking Roundup, from falling home loan rates to suffering savers.
The Reserve Bank cut rates to a record low 1.00% in the beginning of the month, and while the effect might not have been as big as last month’s cut, the double rate cut has still been felt across the banking world.
There were fewer home loan lenders passing on the full cut this month, but interestingly, we also saw changes to credit card interest rates this month. On the savings front, it’s looking more and more dismal as we’re forced to ponder what might happen if a third rate cut comes our way later in the year.
Mozo has a database of more than 1800 products across over 200 providers, so get up to date with all the key changes across these products in the past month below.
- Only 8 home loan providers have passed on the full amount of the RBA’s two latest cash rate cuts to their variable rate customers as margins feel the squeeze. Fixed rates are tumbling with the top 1 and 5 year rates dropping by more than 50bp in the last two months.
- A variety of credit card issuers dropped rates this month, and a subsidiary of one of the big 4 banks cut the rate on its low rate product below the 10% mark.
- A range of mutuals have reduced rates on personal loans, but non-mutual banks have been very quiet on this front.
- Bonus rates for savings accounts are down as expected, but we’re now well into the territory where providers are already offering base rates less than 0.25%, begging the question of what happens if the RBA cuts the cash rate again?
- Term deposits are converging at a point just below 2.00%, regardless of term, following yet another month of heavy rate cutting.
The RBA’s official cash rate was cut by another 25bp in July and as rates head lower, interest margins are inevitably being squeezed as the gap between deposit and loan rates is compressed. With only a handful of lenders yet to adjust rates, we’ve seen only 8 pass on the full 50bp total cash rate reduction over the past two months.
Fixed rates are being driven down rapidly. The number of fixed rate options being cut has been rising for the last few months, but in July the volume of those changes eclipsed previous months, almost double the May and June changes. And in a neat bit of accidental symmetry both the top 1 and 5 year fixed rates are down 60bp from where they were two months ago, perhaps signalling an expectation that there are more rate cuts coming.
Key Changes - Variable Rates
- Once again, the first to announce rate changes following the RBA’s June cash rate decision were the Big 4. ANZ offered the full 25 basis point cut (cumulative 43bp) across all variable rate, Commonwealth Bank and NAB both reduced by 19bp (cumulative 44bp), while Westpac again cut 20bp (cumulative 40bp). Additionally, Westpac removed loan amount based interest rate tiers for its Premier Advantage Package, it now offers a flat 3.69% (4.09% comp rate*) for all loan amounts over $150k for an owner occupied, principal & interest borrower.
- Only 13 home lenders passed on the full rate cut this time round, of these, just 8 have cut 25bp from their mortgage rates in both June and July. These were: Athena, Bank First, Greater Bank, Homestar, Newcastle Permanent, RACQ Bank, The Capricornian, and UBank.
- A total of 64 home lenders made reductions less than the full quarter of a percent, the average cut was 18bp and the smallest reduction was just 5bp. Amongst the well-known brands were: AMP (-20bp), Bank of Queensland (-15bp), Bankwest (19bp), Bendigo Bank (-20bp), Heritage Bank (-15bp), ING (-20bp), ME (-15bp), St.George Group (-20bp) and Suncorp (-19bp).
- Additionally, we are tracking 9 banks, credit unions and other lenders who have yet to apply or announce across the board rate reductions following the Reserve Bank decision.
- AMP cut its packaged fixed rates up to 53bp for is 2 year rate (now 3.10%, 4.39% comp rate*) and 34bp for its 3 year rate (now 3.29%, 4.33% comp rate*).
- ANZ reduced all fixed rates between 10 and 96bp during July. A 3 year packaged fixed rate is now priced at 3.28% (4.53% comp rate*).
- Greater Bank once again made large reductions to its fixed rates, cutting between 10 and 60bp on most term options, many of which now lead the market. Its 4 and 5 year rates are now both 3.39% (4.11% comp rate*), packaged.
- Commonwealth Bank made cuts of 20 to 61bp on its 2, 3 and 5 year fixed rates. For owner occupiers paying principal & interest, a packaged 3 year fixed is now available at 3.28% (4.54% comp rate*).
- NAB cut 30 to 55bp from all fixed rate terms. It’s packaged 3 year fixed is priced at 3.29% (4.45% comp rate*).
*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 Rate Premiums
With the APRA lending curbs now a distant memory, the premiums that were applied as part of the response to those restrictions are slowly unwinding. Mozo put together this chart which shows the shift in average variable rates for different borrower types and repayment options over the last 4 years. Interest only rates for owner occupiers remain elevated, while investor rates are moving closer to the prime principal and interest rates for owner occupiers.
A range of credit card issuers have reacted to the RBA rate cuts, reducing both purchase and cash advance rates, plus we saw the usual shuffling and adjusting of introductory offers.
Bankwest has a large range of card options, but now has its first offering with a rate slipping in below the 10% mark.
- American Express reduced the offer of bonus Velocity Points from 100,000 to 50,000 for the Velocity Platinum Card.
- Auswide Bank passed on both June and July rate cuts on the Low Rate Visa credit card with the purchase and cash advance rates now at 8.95%.
- Bank First reduced purchase and cash advance rates for both Classic and Platinum Visa Credit cards by 15bp, now at 12.79% and 9.84% respectively.
- Bankwest made a 3.09% cut to purchase rates on Breeze and Breeze Platinum Mastercards, now both at 9.90%, while reducing the term of 0% interest on balance transfers from 26 months to 6 months.
- Bendigo Bank changed the Low Rate Mastercard offer from a 0% purchase rate for 12 months to 0% interest on balance transfers for 18 months.
- Citi changed the bonus points offer on the Platinum credit card from 100,000 points to 80,000 points with an additional 40,000 after payment of the second year annual fee.
- Coles reduced the offer on all credit cards of 0% interest on balance transfers from a 15 or 18 month term to a 6 month term.
- Heritage Bank responded to the July rate cut by reducing personal credit card purchase and cash advance rates by 25bp with the Classic and Platinum cards at 17.74% and the Gold Low Rate card at 11.55%.
- HSBC made changes to the Low Rate Credit Card in reducing the purchase rate from 13.25% to 12.99%, increasing the cash advance rate from 21.99% to 25.99% and increasing the annual fee by $20.
- Jetstar made significant reductions to the cash advance rates on its Mastercard range. For the Platinum card the reduction was 2%, now 19.99%, and for the standard Mastercard the cash advance rate was reduced by 7% to 19.99%.
- Macquarie reduced cash advance rates of the Black Card and Platinum Mastercard credit cards by 1.25%, now both at 20.70%. The cash advance rate on the RateSaver Card was cut by 6%, now at 15.95%.
- Virgin Money changed the bonus point conditions for the Virgin Australia Velocity Flyer Cards from a set number of points each month, to 3 points per dollar spent for the first 3 months of use, to a maximum of 10,000 points per month.
- Westpac extended the bonus point offers on Altitude Black credit cards.
Very few lenders have passed on the cash rate reductions to personal loan customers, and rates from the big 4 banks have been static for at least 5 months now. Most of the changes we did see this month were from mutuals.Key Changes
- bcu passed on the RBA rate cut, taking 25bp off its range of personal loan offerings. It’s Car Loan is now priced at 5.65% (6.57% comp rate*), secured Freedom Loan at 7.58% (8.49% comp rate*) and unsecured Freedom Loan at 9.30% (11.36% comp rate*).
- Greater Bank cut 26bp from its fixed New Car Loan (now 5.49%, 5.87% comp rate*), and 40bp from its Secured Personal Loan (currently 6.49%, 6.88% comp rate*).
- Heritage Bank also applied the full RBA cash rate adjustment, taking 25bp from the variable rate on both its Low Rate Secured Personal Loan (now 4.94%, 7.41% comp rate*), and its Standard Personal Loan (now 12.74%).
- NRMA reduced the rate on its fixed Used Car Loan by 99bp, to 6.25%.
- Qudos Bank shaved 15bp from its variable Car Loan and Unsecured Personal Loan (now 6.69% and 11.24%, respectively). Additionally they reduced the fixed rates on its Qantas Points Car Loan by 60bp, now 7.99%. This loan offers 1,000 Qantas Points for every $1,000 on your average loan balance per annum.
- RACV cut 24bp from its fixed Personal Loan, now 6.75%.
*WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. 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 top introductory and ongoing at call deposit rates are now at 2.75%, whether for a short term introductory rate or ongoing bonus rate, although the providers offering those rates haven’t yet announced changes since the last cash rate reduction. Some providers have opted to hold off passing on the full impact of the latest cash rate reduction, but many base rates have already dropped below 0.25%, so it will be interesting to see what happens to those rates if there’s yet another cash rate cut.Key Changes
- ANZ cut 15 basis points from both the introductory rate and base rate on its Online Saver account (now 1.95% and 0.15%, respectively). The ongoing bonus rate on its Progress Saver was cut 25bp to 1.95%, with the 0.01% base rate remaining unchanged.
- Commonwealth Bank also cut 15bp from both the intro (now 2.05%) and base (now 0.15%) on its NetBank Saver account. For its GoalSaver account, the ongoing bonus rate was cut 25bp to 1.15%.
- NAB reduced the introductory and base rates of its iSaver account by 19bp (now 2.11% and 0.11% respectively). It’s Reward Saver ongoing bonus rate was also reduced 19bp (now 1.86%).
- Westpac’s cut 20bp from the introductory rate (now 2.11%) and 15bp from its base rates (now 0.15%). The ongoing bonus rate on it’s Life account remains unchanged at 2.10%, however the reverting rate when the required deposits are not made was cut 20bp to 0.60%.
- The leading ongoing bonus rates, for those that have made changes following the July cash rate reduction, include Bank of Queensland’s Fast Track Saver account at 2.50% (previously 2.75%), MyState Bank’s Bonus Saver at 2.50% (was 2.60%), UBank’s USaver at 2.41% (19bp cut) and ME’s Online Savings Account at 2.35% (was 2.60%).
At a balance of $10,000, the average interest rate in the Mozo database for online savings accounts is now 1.04%, the average ongoing bonus rate is 1.90%, and cash management accounts is now 0.34%.
The number of cuts made to term deposit rates in July was enormous, only just beaten by the number of cuts we saw in June. Rates for term deposits have been converging at a point just below 2%, regardless of term. The average rates for key terms (3, 6, 9 and 12 months, 3 and 5 years) cover a narrow band from 1.79% to 1.91%, just 12bp.
The best rate in Mozo’s database at the time of writing is 2.33%, available for either 3 or 6 months - the next best is 2.30% for a 2 year term. The premium that used to be available for locking money away for an extended period has vanished. The top rates for 1, 3 and 5 years are all 2.20%.Key Changes
- Further reductions for the big 4, with ANZ cutting term deposits across the board by 5 to 55bp, Commonwealth Bank reduced many terms 10 to 60bp, NAB cut 5 to 15bp on all terms, while Westpac cut selected rates 5 to 20bp, mostly on terms 1 to 5 years.
- The largest across the board term deposit cuts were seen from Bank First (20-40bp), Bank of Queensland (10-40bp), Bank of us (15-80bp), Community First CU (35-65bp), Credit Union SA (10-50bp), HSBC (10-35bp), MyState Bank (5-55bp), People’s Choice CU (20-45bp), Police CU (25-65bp), Qudos Bank (35-40bp), Rural Bank (15-40bp) and Suncorp (10-60bp).
The content of this report is produced using Mozo's extensive database of banking products, which is updated every day. If you'd like access to more detailed information, please contact us at firstname.lastname@example.org