RBA February Decision: cash rate steady at 2.50%

In its first board meeting for 2014, the Reserve Bank has elected to keep the cash rate steady at 2.50% where it has been resting quietly since August.

Governor Glenn Stevens said "Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth remains low overall but is picking up gradually for households. Dwelling prices have increased further over the past several months. The exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy.”

What’s in store for 2014?

While the RBA has decided to leave things quiet for now, that doesn’t mean that financial providers are obliged to do the same. In fact, early signs point to an ongoing interest rate war as providers see how low they can go – which is great news for consumers.

Recent highlights include HSBC cutting its Home Value variable loan to 4.75%, giving it the lowest variable rate offered by a lender with a branch network. They are also waiving up-front fees and the loan doesn’t have any ongoing fees. BOQ have also announced they plan to cut 7 basis points from their low variable rate product irrespective of the RBA decision. If you’re happy to go with an online only lender the best variable rate is still loans.com.au, starting at 4.49%.

Fixed rate loans are also coming down with NAB trimming 5 basis points off its 3 year rate (now 5.14%), and 20 basis points off its 4 year rate (to 5.44%), while Westpac cut its 3 year rate by 5 basis points (matching NAB’s 5.14%). Citibank joined the fray by slashing 25 basis points from its 1 year rate, now 4.74%.

The big banks may be getting the headlines but it’s still the smaller players that offer the best rates. One year rates start as low as the 3.99% offered by IMB, the best 2 year rate is Newcastle Permanent’s 4.64%, and the lowest 3 year rate is QT Mutual Bank’s 4.79%.

Just because the official interest rate is going nowhere doesn’t mean you should be. Banks are using out of cycle cuts to attract new business so make the most of it while you can. Check out Mozo’s Home Loan Comparison Tool that will help you find the lowest rates for your loan amount and property value.

Big four savings head south

If you have a savings account with any of the big 4 banks you’d be well advised to check what rate they’re paying you after they kicked off 2014 by slashing deposit rates. Westpac has trimmed 10 basis points from the introductory and bonus rate high interest savings accounts offered by its group of brands that include St.George, Bank of Melbourne, BankSA, RAMS, and Westpac’s own Reward Saver account. Westpac’s Reward Saver 3 month introductory rate is now 3.92%.

Get a better deal

While rates are so low, decent return on your savings stash are proving harder to come by, but they do still exist. Big four savers disappointed with dwindling interest might be more impressed with:

• MEBank Online Savings Account, currently boasting an introductory interest rate of 4.60%
• Or Mozo’s people’s choice winner ING Direct Savings Maximiser with a special rate of 4.35%