April RBA: Cash rate remains stable but uncertainty abounds

In its April meeting this afternoon, the Reserve Bank of Australia has opted to keep interest rates unchanged at the historic low of 0.25%.

In a statement, RBA Governor Philip Lowe reaffirmed the Board’s target of 0.25% for the cash rate and the yield on 3-year Australian government bonds, while also acknowledging the immense challenges the country currently faces.

“There is considerable uncertainty about the near-term outlook for the Australian economy. Much will depend on the success of the efforts to contain the virus and how long the social distancing measures need to remain in place,” said RBA Governor Philip Lowe.

“There are, however, some signs that markets are working more effectively than they were a few weeks ago. This improvement partly reflects the substantial measures undertaken by central banks.”

The RBA held an emergency meeting on March 18 to discuss the coronavirus outbreak and the resulting economic fallout. The next day, it announced it will be cutting the cash rate ahead of schedule — something we hadn’t seen the Board do even during the global financial crisis. 

The move put the threat to the economy into clear focus. Minutes from the meeting released last week revealed the Board expects a “material contraction” to last through the March and June quarters and potentially beyond that. 

Dr Lowe reiterated that point in today’s meeting, adding that unemployment is expected to increase to its highest level for several years.

In the weeks since last month’s cut, the Federal Government and the nation’s banks have wheeled out a number of support measures to help keep businesses and households out of the red, something the Board has welcomed.

“The coordinated monetary and fiscal response, together with complementary measures taken by Australia's banks, will soften the expected contraction and help ensure that the economy is well placed to recover once the health crisis has passed and restrictions are removed,” said Dr Lowe.

“The Australian financial system is resilient. It is well capitalised and in a strong liquidity position, with these financial buffers available to be drawn down if required to support the economy.”

March interest rate wrap

Home loans

In early March, most lenders opted to pass on the first cut to variable rate customers (70 by our count), but there was very little appetite to do so following the second. Instead, we saw attention shift to fixed rates.

The big banks led the charge, with Commonwealth Bank cutting between 0.20% and 0.70% across its fixed rate suite, NAB cutting between 0.40% and 0.90%, and Westpac cutting between 0.10% and 1.00%.

ANZ, the last of the major banks to move, opted to reduce owner occupier two-year fixed rates by 0.49%. But unlike the others, it also announced it would be extending mortgage relief to variable rate customers in the form of a 0.15% reduction.

The rest of the market was quick to respond, and before long another 70 lenders had made cuts to their range of fixed rate home loans. Below, we’ve compiled some of the top fixed and variable rate offers currently in the Mozo database.

Top fixed rate home loan offers*

Bear in mind that Bank Australia’s Clean Energy Home Loan (Fixed, Package) has lower rates in the 1-3 year categories, but it’s only available under certain conditions.

• 1 Year: 2.09% (2.47% comparison rate*) - Well Home Loans Balanced Fixed
• 2 Year: 2.09% (2.44% comparison rate*) - Well Home Loans Balanced Fixed
• 3 Year: 2.09% (2.41% comparison rate*) - Well Home Loans Balanced Fixed
• 4 Year: 2.49% (3.59% comparison rate*) - ING Fixed Rate Loan (Owner Occupiers with Orange Advantage)
• 5 Year: 2.54% (3.50% comparison rate*) - ING Fixed Rate Loan (Owner Occupiers with Orange Advantage)

Top variable rate home loan offers*

For owner occupiers making principal and interest repayments with a max LVR of 80%.

• 2.39% (2.39% comparison rate*) - Reduce Home Loans Rate Slasher Variable Home Loan
• 2.44% (2.45% comparison rate*) - Reduce Home Loans Low Rider Home Loan
• 2.44% (2.49% comparison rate*) - HomeStar Star Essentials Home Loan
• 2.47% (2.53% comparison rate*) - Well Home Loans Well Balanced
• 2.49% (2.47% comparison rate*) - Reduce Home Loans Rate Buster High Lend Variable Home Loan

Savings accounts and term deposits

Savings account rates continued to fall last month, with the average ongoing rate now sitting at 0.84% p.a. Online banks ING, ME, and UBank made cuts of between 0.15% and 0.25%, while neobanks 86 400 and Up, which previously offered the joint highest ongoing bonus rates in our database at 2.25%, now offer rates of 2.00% p.a. and 1.85% p.a., respectively.

As for term deposits, many banks decided to increase select rates following March’s second cut as part of a broader attempt to support Australian households. Among the big banks, CommBank, NAB and Westpac raised rates for select terms by as much as 0.65%.

Below are the top five bonus savings account interest rates currently in the Mozo database, along with the top term deposit rates for terms ranging from six months to five years.

Top ongoing savings account bonus offers*

• 2.00% - BOQ Fast Track Saver Account (Available on balances up to $250,000 if a min. $1000 is deposited into a linked Day2Day Plus Account). 
• 2.00% - MyState Bank Bonus Saver Account (Available on balances up to $250,000 if a min. $20 is deposited and 5 transactions made using linked Everyday or Glide transaction accounts). 
• 2.00% - 86 400 Save Account (Available on balances up to $300,000 if a min. $1,000 deposited into a Pay or Save account). 
• 1.90% - Suncorp Growth Saver Account (Available on balances over $0 when balance grows by $200 or more no more than one withdrawal is made).
• 1.85% - UBank USaver with Ultra Transaction Account (Available on balances below $200,000 if $200 deposited into either account). 

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

• 6 months: 2.05% - Judo Bank
• 1 Year: 2.07% - Judo Bank
• 2 Year: 2.00% - Judo Bank
• 3 Year: 2.05% - Judo Bank
• 4 Year: 2.10% - Judo Bank
• 5 Year: 2.25% - Rabobank 

If you’re looking to compare more products, our home loan, savings accounts and term deposit comparison pages can help.

*Rates accurate as of April 7, 2020.

Read about the Reserve Bank's inter-meeting cut in March.