No change in sight: RBA kicks 2016 off with 2% official cash rate

The RBA has met for the first time in 2016 amid less than optimal global conditions, announcing that the official cash rate will remain unchanged at 2% for the ninth month in a row.

Uncertainty in the global market, including weakening growth in three of Australia’s biggest trading partners, China, Japan and the US and oil prices at a 13 year low, have prompted overseas central banks in Europe, Japan and New Zealand to cut rates to combat slow economies and deflation.

Changes at home have also had nerves mounting, as the property market boom shows signs of cooling, with annual price growth in Sydney and Melbourne slowing, and consumer and business confidence falling since December.

But recent upheaval wasn’t expected to be enough to change the outlook of the RBA - especially after the Aussie dollar’s rise last night from 70.77 to 70.97 US cents - with the Board electing to keep the cash rate steady at 2%. 

Governor Glenn Stevens said in a statement that, "surveys of business conditions moved to above average levels, employment growth picked up and the unemployment rate declined in the second half of the year, even though measured GDP growth was below average. The pace of lending to businesses also picked up."

He also cited low inflation in the decision to keep the cash rate unchanged, saying, "the Board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target."

A fresh look at your home loan

At the end of last year, we saw overall increases in variable home loan rates, but January altered this trend, featuring a relatively even number of rises and cuts.

The increases were mainly with owner-occupier loans, while one pattern that did continue on from the end of last year was reduction in rates for investor home loans. Throughout the month, we saw lenders reduce premiums for investors and one remove the fixed rate premium completely. The reductions on home loan rates for investors included:

• AMP Basic Package variable rate was cut by 40bp to 4.57%

• Beyond Bank Low Rate Special Variable Home Loan cut by 20bp to 4.14%

• IMB Bank Essentials Home Loan variable rate cut by 5bp to 4.56%

• ME Flexible Home Loan Member Package variable rate cut back by 30bp to 4.39%

But if you live in your own home you’ll be happy to hear some of the best variable rates in the market are also available to owner occupiers, including:

• Mortgage Simple Limited Time Offer Home Loan: 3.89% (comparison rate 4.05%)

• Homestar Owner Occupier Loan: 3.94% (comparison rate 3.97%)

• QPCU Discounted Classic Home Loan: 3.97% (comparison rate 3.97%)

(Above home loans for owner-occupiers, with an LVR under 80%)

See what other deals are on offer, including fixed rates and investor loans, using our home loan comparison tool.

What about your savings account?

The unchanged cash rate is reflected in the activity of savings rates - or rather the lack of activity. There’s been very little action on this front, with the exception of NAB increasing the ongoing bonus rate of its Online Saver account by 25bp to 3.1%.

If you’re looking for a new place to stash your cash this year for high returns, check out these top savings accounts with great introductory rate offers (conditions apply):

• P&N Bank Hi Saver: 3.50% for the first 4 months

• RaboDirect High Interest Savings: 3.50% for the first 4 months

• Bank of Sydney SuperRate Account: 3.30% for the first 4 months

There are also some great deals available on ongoing bonus rates if you’re looking for the long term (conditions apply):

• ME Online Savings Account: 3.60% if you make a weekly purchase using PayPass Tap & Go on your ME EveryDay Transaction Account

• ING Direct Savings Maximiser: 3.50% if you have a linked Orange Everyday Account and deposit at least $1,000 a month

• RAMS Saver Account: 3.40% bonus interest when you make no withdrawals and deposit $200 a month

You can also head over to our savings account comparisons page to find the perfect place for your rainy day fund.

Want to know more about the rate changes in the banking market? This is just the tip of the iceberg; for a full rundown subscribe to the Mozo Banking Roundup newsletter.