RBA leaves interest rates on hold at 1.50% in first meeting of 2017

As expected by the vast majority of analysts, the Reserve Bank has opted to leave interest rates on hold at 1.50% at its first board meeting of 2017.

Amid global turbulence following Donald Trump’s inauguration as President of the US and rising political tensions around the world, it’s no surprise that the RBA chose to cool its heels and proceed into 2017 with caution.

In his statement, Reserve Bank Governor Philip Lowe said, “Above-trend growth is expected in a number of advanced economies, although uncertainties remain," and mentioned both China and the US.

Although we saw weaker than expected growth at home in Australia, the RBA is hoping to see inflation rise to the desired 2% mark in 2017, making further rate cuts unlikely and unnecessary.

"In Australia, the economy is continuing its transition following the end of the mining investment boom. GDP was weaker than expected in the September quarter, largely reflecting temporary factors. A return to reasonable growth is expected in the December quarter," Lowe added.

Mozo’s Data Manager Peter Marshall recently expounded upon the unlikeliness of a February change, and predicted that Australia would see a rate increase halfway through the year - and no changes before then.

Time to lock in a home loan rate

The RBA may be keeping rates on hold, but the banks have other ideas. January saw 50 providers hike rates on home loans, according to Mozo’s Banking Roundup, with a 0.10% increase being the most common.

Marshall said that these out of cycle rate hikes mean it’s likely time for borrowers to lock in a fixed interest rate, as banks aren’t likely to pass on any rate cuts, even if the RBA does decrease later in the year.

If you’re looking for a fixed rate mortgage to get you through the bumpy ride ahead, check out these top options:

• 1 year - 3.59% - Greater Bank (comparison rate: 4.42%)
• 2 year - 3.69% - Bank Australia  (comparison rate: 4.31%)
• 3 year - 3.59% - Easy Street (comparison rate: 4.01%)
• 4 year - 3.75% - BCU (comparison rate: 4.24%)
• 5 year - 4.60% - Gateway Credit Union (comparison rate: 4.35%)

But if you prefer the flexibility of variable rates, it’s not all doom and gloom either. Here are some of the top offers at the moment:

• Homestar Owner Occupier Loan - 3.44% (comparison rate: 3.47%)
  
• FreedomLend Variable Home Loan - 3.53% (comparison rate: 3.53%)
• loans.com.au Essentials Variable - 3.59% (comparison rate: 3.61%)

Savings on their way South

Although rates are rising for borrowers, savers are still suffering cuts to already low interest rates. 3 out of 4 of the big banks have cut rates in 2017, along with a number of smaller challenger banks.

But there are still some good offers on the market if you know where to look. Here are some of the top places for your cash stash:

• ME Online Savings Account - 3.05% (when you make a weekly Tap & Go purchase with your ME Everyday Transaction Account Debit MasterCard)AMP Bett3r Save Account - 3.00% (with a minimum deposit of $2,000 per month into linked Bett3r Pay Account)Australian Unity Active Saver - 3.00% (with a minimum deposit of $250 and no withdrawals in the month)ING DIRECT Savings Maximiser - 3.00% (when you also have an Orange Everyday and deposit $1,000 each month)RAMS Saver Account - 3.00% (with a minimum deposit of $200 and no withdrawals in the month)

See our savings account comparison table to check out the other top deals on the market.

As with home loans, Marshall said it might be time for savers to look at locking in a rate before things get worse. So for long term savers, term deposits of 12 months or more may offer a better return on their rainy day fund.

Best term deposits

• 1 year - 3.00% - Teachers Mutual Bank, Unibank
• 2 year - 3.20% - Maitland Mutual Building Society
• 3 year - 3.30% - Maitland Mutual Building Society
• 4 year - 3.10% - Arab Bank Australia, G&C Mutual Bank,
• 5 year - 3.30% - RaboDirect

Check out other term deposit options with our term deposit search tool.

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