Mozo Money Moves: Rates and unemployment hold steady as markets await the quarterly CPI release
Welcome back to Mozo Money Moves, your weekly snapshot of the latest banking news and interest rate moves in personal finance.
This week, as many return to work after the festive season, the markets are still waking up, with only a few minor changes to variable home loan rates and fixed home loan rates.
Apart from a multitude of small cuts and hikes here and there on term deposits rates, moves across the Mozo database for deposits have also been minor.
In the insurance space, the announcement of the winners of the Mozo Experts Choice Awards for Travel Insurance highlighted the best value policies and highest quality coverage for Aussies already planning their next holiday, and insurance writer Brad Buzzard explained the evolving dynamics of Pay as you Drive (PAYD) car insurance.
Mozo also dived into the latest release from the Australian Competition and Consumer Commission (ACCC), which revealed that when it comes to refunds and warranties, Australian consumers may be entitled to more than they think.
According to the regulator, if a product or service has a major problem, consumers do have the right to choose a refund, even if a business claims “no refunds under any circumstances” on their website.
Mozo Insights:
- Cameron Thomson explains how savvy savers can make the most of a high interest rate environment by fixing savings rates with a term deposit.
- Personal finance writer Gabriella Margerison shares the best side hustles to help households generate an extra stream of income in 2024.
- Switching savings accounts can be a strategic move in personal finance management, but how do you know if it’s the right time to switch?
- If you’re looking to step onto the property ladder, or buy a new investment, in 2024, Managing Editor JP Pelosi provides a handy 5-step checklist.
Home Loan Moves
Despite a slow start to the year in regard to home loan rate moves, Mozo money expert Rachel Wastell expects the market to pick up after January 31. This is when the quarterly CPI (inflation data) is released, and banks will have a better idea of when the first rate cut from the RBA will occur.
“Banks are likely waiting to see whether there’s an uptick in inflation when the quarterly CPI comes out Wednesday week, before making any major moves to interest rates on home loans.”
“While the trend globally for inflation, and therefore cash rates, does look to be down, there’s a level of uncertainty as to when cash rates will be cut and how much by, especially after the US and UK inflation data showed a slight uptick.”
"Recent years have shown the influence of global central banks on the direction of the Australian cash rate, and commentators are now shifting expectations of US rate cuts from the first quarter of 2024, to later in the year.”
Mozo analysis shows that if there is a rate cut in 2024 of 25 basis points, which would take the cash rate back down to 4.10%, borrowers with a $750,000 loan could save up $118 a month on repayments. If the RBA cuts the cash rate to 3.85%, those same borrowers could shave $235 off their monthly mortgage bill.
| IF THE RBA CUTS THE CASH RATE TO 4.10% | ||||
| Loan Amount | Monthly Repayments ($) | Potential Repayments After Cut ($) | Monthly Repayment Difference ($) | Yearly Repayment Difference ($) |
| $350,000 | $2,440 | $2,385 | $55 | $660 |
| $500,000 | $3,486 | $3,407 | $79 | $948 |
| $750,000 | $5,229 | $5,111 | $118 | $1,416 |
| $1,000,000 | $6,972 | $6,815 | $157 | $1,884 |
| source: mozo.com.au Based on 25 year terms, Owner Occupier Principal & Interest, LVR <80%. Average variable rate of 6.85%p.a. as of 19th January 2024, and 6.85%p.a. minus 0.25% used for Cash Rate at 4.10% figure. Data accurate as at 19th January 2024. | ||||
| IF THE RBA CUTS THE CASH RATE TO 3.85% | ||||
| Loan Amount | Monthly Repayments ($) | Potential Repayments After Cut ($) | Monthly Repayment Difference ($) | Yearly Repayment Difference ($) |
| $350,000 | $2,440 | $2,331 | $109 | $1,308 |
| $500,000 | $3,486 | $3,329 | $157 | $1,884 |
| $750,000 | $5,229 | $4,994 | $235 | $2,820 |
| $1,000,000 | $6,972 | $6,659 | $313 | $3,756 |
| source: mozo.com.au Based on 25 year terms, Owner Occupier Principal & Interest, LVR <80%. Average variable rate of 6.85%p.a. as of 19th January 2024, and 6.85%p.a. minus 0.50% used for Cash Rate at 3.85% figure. Data accurate as at 19th January 2024. | ||||
However, Wastell stresses the need for borrowers to be cautious about expecting a rate cut.
“Homeowners should be wary of counting their chickens before they hatch, and understand that since COVID, predicting rate moves has become more complex.”
“As we saw in 2023, some RBA cash rate decisions shocked even the most experienced of economists. So, if you’re on a variable rate of 6 or higher and want to reduce your home loan repayments don’t wait for the RBA to move.”
“Refinancing to a lower rate can save you money on mortgage repayments before the rate cuts come, with some lenders are still offering rates as low as 5.69% p.a.”
Mozo Insights:
- Despite ongoing inflation and higher interest rates, first home buyer activity roared back to life by the end of 2023, as Jack Dona reports.
- Get ahead on mortgage repayments by switching to a lower rate that could save you tens of thousands of dollars in interest over a 25 year loan term.
- Have you been wondering whether to go with one of the bigger banks or a smaller lender when taking out a home loan? Here are the pros and cons.
LOW RATE HOME LOANS
| Lender | Home Loan | Variable Rate (p.a.) | Comparison Rate* (p.a.) |
| The Capricornian | Country to Coast Variable Rate Offset Home Loan | 5.69% | 5.70% |
| Illawarra Credit Union | Bare Essentials Special Offer | 5.79% | 5.89% |
| 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% |
| source: mozo.com.au as at 18th January 2024, leading variable rates for owner occupier, principal & interest home loans at $400,000, 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. | |||
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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