No November surprises as RBA keeps interest rates locked at 1.50%

Halloween may have offered plenty of shocks and scares last week, but in typical fashion the RBA failed to get in on the spirit, instead providing a less-than-shocking cash rate decision at today’s monthly meeting in Sydney.

The Reserve Bank Board maintained the official cash rate at a record low 1.50% for a 25th straight meeting, with rates having remained untouched since August 2016 - a stretch that’s likely to remain unbroken in the near term.

In his monetary policy decision statement, RBA Governor Philip Lowe maintained that low interest rates were continuing to support the economy, but he also addressed one of the main pre-decision talking points - the most recent inflation results. 

"Inflation remains low and stable. Over the past year, CPI inflation was 1.9 per cent and, in underlying terms, inflation was 1¾ per cent. These outcomes were in line with the Bank's expectations and were influenced by declines in some administered prices due to changes in government policies," he said.

"Inflation is expected to pick up over the next couple of years, with the pick-up likely to be gradual. The central scenario is for inflation to be 2¼ per cent in 2019 and a bit higher in the following year."

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According to Mozo Data Manager Peter Marshall, the most recent inflation figures make the prospect of a near-term hike in the official cash rate even more unlikely and even keep the door open for a possible rate cut.  

“The RBA has previously indicated that it would like to see interest rates return towards more of a neutral level and that means lifting them, so with CPI being below the RBA’s target range of 2-3% they’re not going to want to do that just yet,” he said.  

“It also keeps the possibility of a rate cut in play, although I’d imagine the RBA would be reluctant to take this course given it would move us in the opposite direction of US interest rates. So barring an external shock, I really do think it’s going to be a long time until we see rates move.”

October Rate Wrap

Home Loans

As usual, while the official cash rate has remained at a standstill, home loan rates proved to do the opposite - though the news wasn’t all about rate increases in October.

According to the Mozo database, while a number of lenders, including the Commonwealth Bank, did make across the board hikes to their variable home loan rate loans, there were also a some strategic cuts.

The Commonwealth Bank also paved the way in this respect by shaving 25 basis points off its Extra Home Loan interest rate which now sits at 3.89%, while HSBC reduced several of its rates by 5 basis points including its Discounted Home Value Loan offer which is 3.59% for owner occupiers.

“Funding costs have gone up which is driving rates up overall, but we’ve also got a situation where banks are looking at closely following the state of the housing market. With house prices coming down, less people changing houses and fewer people buying news homes, the pool of new customers is starting to diminish,” said Marshall.

“So the banks are cherry picking. They’re trying to encourage people to refinance by dropping rates on particular loans, because these are customers that have already been vetted by their existing lenders and have lower LVR’s which make them less risky.”

Check out some of the lowest variable and fixed 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%**)
• Easy Street Standard Variable - 3.49% (comparison rate: 3.52%**)
• Well Home Loans - Well Balanced 3.49% (comparison rate: 3.53%**)
• 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%**)
  
• 5 Year: FreedomLend Fixed Home Loan 4.08% (comparison rate: 4.36%**)

Term deposits and savings accounts

For months term deposit rates in the Mozo database have been on an upward trend, but for the first time since February rate cuts outweighed rate increases.

Among the major changes to term deposit rates in the Mozo database throughout October was the decision by Teachers Mutual Bank to drop its 1 year offer from 3.00% to 2.90%, while Maitland Mutual reduced its 3 year offer from 3.05% to 3.00%.

“I think the downwards trend we’ve seen with term deposit rates over the past month is really in part a reflection of the realisation that the RBA might not be raising rates quite as early as some had previously expected,” said Marshall.
“People are getting a bit of a reality check of where rates are headed, and that’s nowhere anytime soon.”

Best term deposit offers (based on a balance of $25,000)*

• 1 Year: 2.90% - Teachers Mutual Bank, UniBank
  
• 2 Year: 3.00% - Teachers Mutual Bank, UniBank
  
• 3 Year: 3.05% - Australian Unity, Bank Australia, Greater Bank, Heritage Bank, ME, Maitland Mutual, Qudos Bank, Teachers Mutual Bank, UniBank
  
• 4 Year: 3.20% - RaboDirect
  
• 5 Year: 3.40% - RaboDirect

Meanwhile there was little to report in the way of action across the savings account market in October, with the major change coming from ANZ which hiked its Progress Saver account from 1.71% to 2.40%. The change means that the Commonwealth Bank is the only major bank without an ongoing bonus savings account rate above 2.00%.

For comparison, here are some of the top ongoing savings account rates currently in the Mozo database:

Best ongoing savings account bonus offers*

• 2.87% - UBank USaver with Ultra Transaction Account (if you deposit at least $200 into the account or a linked Ultra Transaction Account each month)
  
• 2.85% - ME Online Savings Account (if you make a weekly Tap & Go purchase using a linked ME Everyday Transaction Account buck Debit MasterCard)
  
• 2.80% - Australian Unity Active Saver (if you make a minimum deposit of $250 and no withdrawals each month)
  
• 2.80% - RAMS Saver Account (if you deposit at least $200 and make no withdrawals each the month)
  
• 2.80% - ING Savings Maximiser (if 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)
  

RELATED: Seesawing rates: ANZ hikes Progress Saver to 2.40%, reduces Online Saver offer

Want to compare even more great banking offers? Start your search today by comparing home loan, term deposit and savings account rates using Mozo’s range of handy comparison tables.

*Rates accurate as of November 6, 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.