RBA announces official cash rate will remain at 2%. Again.
Article by Kelly Emmerton
Experts had been predicting that the cash rate would remain on hold at 2% after the RBA’s April announcement and those predictions have proved true, with the record low rate locked in for the eleventh month in a row.
Despite a rise in the Aussie dollar, domestic growth and commodity prices are solid, and experts said the economy is stable enough that they wouldn’t expect the RBA to upset the optimistic outlook with a cut just yet.
In a statement, Governor Glenn Stevens said that, “Under present circumstances, an appreciating exchange rate could complicate the adjustment under way in the economy.”
He added that, “Low interest rates are supporting demand, while supervisory measures are working to emphasise prudent lending standards and so to contain risks in the housing market. Credit growth to households continues at a moderate pace, albeit with a changed composition between investors and owner-occupiers.”
With next month’s RBA announcement falling on the same day as the budget announcement - which Prime Minister Malcolm Turnbull brought forward a week - and the potential for a double dissolution election in July, experts are predicting further stability for the official cash rate. Some have suggested that the 2% rate will hold steady throughout June and July as the benefits of a cut diminish amidst political and economic factors.
However, the strengthened Aussie dollar and its potential effect on growth and inflation mean many are still expecting cuts later in the year.
What does this mean for your home loan?
Although this month has seen little change in home loan offers, it’s no time for Aussie borrowers to start slacking off on their mortgage situation. Regular reviews of home loan rates can help ensure borrowers are getting the best deal possible at any given time, as an outdated home loan deal could be costing thousands of dollars each year.
For example, our home loan comparison calculator shows that on a $700,000 home loan, the average rate of 4.71% would cost the borrower $492,420 in interest over a 25 year loan period. The same loan, with one of the lowest variable rate home loan offers in Mozo’s database of just 3.94% would cost the borrower just $401,512 in interest over the life of the loan. That’s a saving of $90,908 all up, or just over $300 each month.
To help you snag a great home loan deal, Mozo’s experts have rounded up the best home loan offers on the market at the moment.
Best variable rate home loans:
(For owner occupiers with LVR 80% or below)
- Homestar Owner Occupier loan – 3.94% (comparison rate 3.97%)
- Bank Australia Basic Home Loan - 3.98% (comparison rate 4.02%)
- Freedomlend Variable Home Loan – 3.98% (comparison rate 3.99%)
Plus a bunch of providers offering home loans at a 3.99% rate. Find them here.
Best fixed rate home loans:
- 1 year – 3.50% from Illawarra Credit Union (comparison rate 4.31%)
- 2 years – 3.85% from Illawarra Credit Union (comparison rate 4.30%)
- 3 years – 3.89% from Illawarra Credit Union (comparison rate 4.27%)
- 4 years – 4.24% from Greater Building Society (comparison rate 4.74%)
- 5 years – 4.24% from Greater Building Society (comparison rate 4.73%)
You can find all the best home loan deals in our home loan comparison table.
What about your savings?
While low interest rates are good news for borrowers, savers have had it a lot tougher. Although there weren’t many changes in savings accounts, most of those that did happen were cuts, with the average interest rate now sitting at just 2.31%.
On a savings stash of $10,000, this rate would mean $1,223 extra in interest payments over a five year period. But to help savers grow their pile even quicker, Mozo has taken a few of the top results from our savings account comparison and crunched the numbers on what difference the higher rates could make to your savings.
Here are the results:
|Account||Interest rate and conditions ||Interest on $10,000 over 5 years*|
|ME Online Savings Account||3.60% - as long as you make a weekly purchase using PayPass Tap & Go on a linked ME EveryDay Transaction Account||$1,969|
|ING Direct Savings Maximiser||3.50% - as long as you deposit at least $1,000 a month and have a linked Orange Everyday Account||$7,376|
|UBank USaver with Ultra Transaction Account||3.37% - if you make a $200 deposit into either account each month||$2,883|
|RaboDirect Notice Saver||3.20% - for 90 days, but you have to give notice to withdraw funds||$1,733|
|Bankwest Hero Saver||3.15% - with at least $200 a month deposit and no withdrawals||$2,682|
|RAMS Saver||3.15% - as long as you deposit $200 a month and don’t make any withdrawals||$2,682|
*Includes required monthly deposits if they apply.
Switch & Save Calculator
Compare savings from over 100 credit cards.
How much could you save by switching your credit card?
Find out in a few clicks.