August RBA interest rate hold marks two years of stability
Article by Tom Watson
With today’s decision to leave the official cash rate on hold at 1.50% for a 24th consecutive month, the RBA’s affair with steady interest rates has well and truly eclipsed that (at least in terms of length) of most budding relationships.
High levels of household debt and uncertainty in the global economy continue to provide impediments to any action from the board, but RBA Governor, Philip Lowe, did highlight a positive trend in employment figures in his Monetary Policy statement.
"The outlook for the labour market remains positive. The vacancy rate is high and other forward-looking indicators continue to point to solid growth in employment," he said.
"Employment growth continues to be faster than growth in the working-age population. A further gradual decline in the unemployment rate is expected over the next couple of years to around 5 per cent."
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According to Mozo Product Data Manager, Peter Marshall, while the status quo remains unlikely to change in the foreseeable future, the direction in which rates will move next isn’t so certain.
“Depending on what happens in the broader economy, particularly globally, we shouldn’t discount the possibility of the next RBA rate move being a cut. It’s definitely not off the table,” he said.
“The RBA is still preferring to make noises about rate increases, but that’s been toned down a lot over the last few months. We really just have to see how the next six months go, particularly with the United States and China trade situation and the impact it could have on Australia.”
Home loan rates and household debt
While the official cash rate has now remained at a steady 1.50% for two years, the same certainly hasn’t been true of late for variable home loan rates, with a host of lenders having made out-of-cycle rate increases since the start of June.
In fact, according to Mozo’s July Banking Roundup, 18 home loan lenders tracked in the Mozo database have hiked rates for the majority of their customers in the last two months.
And the recent hikes are unlikely to have helped households already struggling with high levels of debt, with recent figures released by global ratings agency, Moody’s indicating that Australia’s household debt as a share of disposable income has now reached 200% - one of the highest levels in the world.
So if you’re keen to ease the burden on your own household budget by refinancing to a better value home loan, here are some of lowest home loan rates currently* in the Mozo database:
Best variable rate home loan offers
- Reduce Home Loans Rate Lovers Variable Home Loan - 3.44% (comparison rate: 3.51%**)
- BIDeloan SMARTeloan - 3.44% (comparison rate: 3.66%**)
- Easy Street Standard Variable - 3.49% (comparison rate: 3.52%**)
- iMortgage Fusion 80 - 3.52% (comparison rate: 3.67%**)
- Freedomlend Variable Home Loan - 3.54% (comparison rate: 3.55%**)
- Homestar Variable Rate Loan - 3.54% (comparison rate: 3.59%**)
Mixed news for savers
Last month we reported on the term deposit market maintaining it’s steady rise as banks compete for stable sources of funding. And while term deposit rate rises have continued to outweigh cuts, the Mozo database recorded more of the latter during the month of July than in previous months.
The most fervent action of late has centered upon 12 month term deposit rates, with both Teachers Mutual Bank and UniBank increasing their 12 month offers by 20 basis points to a market-leading 3.00%.
On the other side of the savings spectrum, the state of savings accounts rates can be summed up in five words: cuts, cuts and more cuts.
The most serious pain for savers has remained in savings account base rates, as the Commonwealth Bank (30 basis point cut) and Westpac (30 basis point cut) joined a number of other banks in dropping their respective base rates during July.
Despite the cuts from some banks, the most competitive ongoing savings account offers remain untouched:
Best ongoing savings account offers
- RAMS Saver Account - 3.00% (if you deposit a at least $200 and make no withdrawals each month)
- UBank USaver with Ultra Transaction Account - 2.87% (if you deposit a minimum $200 into the account or a linked Ultra Transaction Account each month)
- ME Online Savings Account - 2.85% (if you make a weekly tap and go purchase using your linked ME Everyday Transaction Account Debit MasterCard)
- Australian Unity Active Saver - 2.80% (if you make a minimum deposit of at least $250 and no withdrawals every month)
- ING Savings Maximiser - 2.80% (if you deposit $1,000 or more each month from a linked Orange Everyday account as well as make at least five purchases on your credit or debit card)
Best term deposit offers (based on a balance of $25,000)
- 1 Year: 3.00% - Teachers Mutual Bank, UniBank
- 2 Year: 3.00% - CUA, Greater Bank, ING, Maitland Mutual
- 3 Year: 3.05% - Greater Bank, Maitland Mutual
- 4 Year: 3.30% - RaboDirect
- 5 Year: 3.50% - RaboDirect
*Rates accurate as of August 7, 2018.
**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.
Read our last month Reserve Bank interest rates update
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