Interest rates steady at 1.50% following October RBA meeting

October is officially here and finally things are heating up - at least, they are when it comes to the weather. The same can’t be said for the official cash rate though, with the RBA deciding to keep it steady for at least another month following today’s meeting in Sydney.

The decision to maintain interest rates at a record low 1.50% marks a 26th straight month of rate stability from the Reserve Bank board - a streak which, at least in the minds of many experts, is likely to continue to remain unbroken for the time being.  

In his monetary policy decision statement, RBA governor Philip Lowe pointed to a number of positive economic indicators including economic growth and unemployment figures, but highlighted household debt and the impact of the drought on the farming sector as causes for concern. 

“The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual,” he said. 

“Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

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According to Mozo Data Manager, Peter Marshall, the relative stability of a number of key economic indicators means nothing has changed when looking at the short to medium term outlook for the official cash rate, not even with the widening gap between Australian and US interest rates.  

“Normally the RBA would not let the gap between Australian and US rates increase too much. They would want to follow in the footsteps of the Federal Reserve in order to stop capital outflows from Australia, but they just don’t have the scope to increase rates at the moment,” he said.  

“We’re still looking at a situation where the RBA will either have to hold rates or perhaps, if there are increasing signs of weakness in the economy, look at introducing a rate cut to partially offset the rate rises we’ve been seeing from many lenders over the last couple of months.”

September interest rate wrap

Home loans

While the official cash rate continues to remain stable, the same can’t be said for home loan interest rates. In fact, in long anticipated move, both ANZ and the Commonwealth Bank joined fellow big bank Westpac in announcing plans to hike variable interest rates in early September.

ANZ announced a variable interest rate increase of 16 basis points which came into effect on September 27, while the Commonwealth Bank will hike it’s own variable rates by 15 basis points from October 4.

“The decision by ANZ and the Commonwealth Bank to lift rates has been expected for a while, although given that the increases aren’t terribly large I would expect that most households will be able to accommodate them,” said Marshall.  

“There have been some statistics showing home loan arrears are starting to climb though. While not to a level that’s too concerning at the moment, it is something the RBA will be keeping an eye on.”

However, NAB did buck the trend by keeping variable interest rates on hold for the time being with NAB CEO, Andrew Thorburn, citing the need to rebuild customer trust as one of the main  reasons behind the move.

With rates from a number of lenders on the rise, here are some of the best variable and fixed rate offers 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: 3.90%**)
• Easy Street Standard Variable - 3.49% (comparison rate: 3.53%**)
• 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%**)
  

Best fixed rate home loan offers*

• 1 Year: Greater Bank Ultimate Home Loan (Fixed, Package) - 3.49% (comparison rate: 4.57%**)
  
• 2 Year: Tic:Toc Fixed Home Loan - 3.64% (comparison rate: 3.65%**)
  
• 3 Year: Easy Street Fixed Home Loan - 3.69% (comparison rate: 4.11%**) and Community First Credit Union Fixed Rate Home Loan - 3.69 (comparison rate: 4.93%**)
  
• 4 Year: FreedomLend Fixed Home Loan 3.92% (comparison rate: 4.30%**) and ING Fixed Rate Loan - 3.92% (comparison rate: 4.52%**)
  
• 5 Year: ING Fixed Rate Loan - 3.98% (comparison rate: 4.49%**)

Term deposits and savings accounts

The outlook for Aussie savers remained relatively stable during September, with term deposit rate increases outweighing rate cuts for a seventh straight month. Though once again, the top term deposit rates in the Mozo database remained the same.

The news wasn’t quite so good in the world of savings accounts following RAMS’ decision last week to cut its Saver Account interest rate by 20 basis points from 3.00% to 2.80%.

The Saver Account had previously held the mantle of top bonus savings account interest rate in the Mozo database, but that title now passes to UBank’s USaver account which has an interest rate of 2.87%.

Here are the top five bonus savings account interest rates currently in the Mozo database, as well as the top term deposit rates for 1-5 year terms:        

Best ongoing savings account bonus offers*

• 2.87% - UBank USaver with Ultra Transaction Account (when you deposit at least $200 into the account or a linked Ultra Transaction Account every month)
• 2.85% - ME Online Savings Account (when you make a weekly Tap & Go purchase using a linked ME Everyday Transaction Account buck Debit MasterCard)
• 2.80% - Australian Unity Active Saver (when you make a minimum deposit of $250 and no withdrawals each month)
• 2.80% - RAMS Saver Account (when you deposit at least $200 and make no withdrawals throughout the month)
• 2.80% - ING Savings Maximiser (when you deposit at least $1,000 each month from a linked Orange Everyday account and 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% - Maitland Mutual, Teachers Mutual Bank, UniBank
• 3 Year: 3.05% - Maitland Mutual
• 4 Year: 3.20% - RaboDirect
• 5 Year: 3.40% - RaboDirect

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Interested in comparing even more banking offers? Get started by comparing home loan, savings accounts and term deposit rates with help from Mozo’s handy comparison tables.

*Rates accurate as of October 2, 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.