RBA interest rates steady at 1.50% ahead of May Budget announcement

The Reserve Bank has opted to keep the official cash rate steady at 1.50% yet again, as expected by the majority of economists.

With the 2017 Budget announcement just days away, it seems the RBA is content to wait and see what Treasurer Scott Morrison has to say before making a move on interest rates.

Indeed, there was little reason for the RBA to cut rates further at this point, after inflation rose to 2.1% in the March 2017 quarter and APRA stepped in to put restrictions on lending in the face of an ever-growing housing market.

In his statement, RBA Governor Philip Lowe said, "Growth is expected to increase gradually over the next couple of years to a little above 3 per cent. The economy is continuing its transition following the end of the mining investment boom."

He also mentioned that while housing debt has outpaced the growth in household incomes, "recently announced supervisory measures should help address the risks associated with high and rising levels of indebtedness."

Although they’ve opted to stay put this month, stagnant wage growth, unemployment numbers hovering just below 6% and weak growth in the US following a Fed rate hike mean the Reserve Bank has likely not ruled out a 2017 interest rate change just yet.

Interest-only home loans on the rise

Although the RBA has kept interest rates on hold since August now, that hasn’t stopped banks from making a number of out-of-cycle home loan rate rises. Most recently, the Big Banks did some shuffling of fixed interest rates, mostly hiking rates for investors and interest-only borrowers, although those making principal and interest repayments saw some rate cuts.

Unfortunately, with an RBA rate hike still on the cards for later this year or early next, things are likely to get worse before they get better for borrowers. The good news is there are still some great deals available:

Best fixed rate home loan offers

• 1 year - 3.59% - Greater Bank (comparison rate: 4.48%)
• 2 year - 3.59% - Select Encompass Credit Union (comparison rate: 4.12%)
• 3 year - 3.59% - Easy Street (comparison rate: 4.01%)
• 4 year - 4.04% - Homestar (comparison rate: 3.73%)
• 5 year - 4.13% - FreedomLend (comparison rate: 3.82%)

Best variable rate home loan offers

• FreedomLend Variable Home Loan - 3.47% (comparison rate: 3.55%)
• Homestar Owner Occupier Loan - 3.49% (comparison rate: 3.53%)
• loans.com.au Essentials Variable - 3.64% (comparison rate: 3.66%)

Savings inching downwards

Savers must be sick of hearing bad news by now. This month, a handful of banks made small reductions to savings account rates, but bucking the trend, CommBank actually bumped it’s Netbank Saver rate up a little - from 2.50% to 2.55%.

So the outlook is not as gloomy as it could be and those looking to build up their savings stash don’t need to panic just yet. There are still a number of great value places to stash your cash:

Best savings accounts

• 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)
• Newcastle Permanent Smart Saver Account - 3.00% (when you increase the account balance by $150 (excluding interest) and make no more than two withdrawals in the month)
• RAMS Saver Account - 3.00% (with a minimum deposit of $200 and no withdrawals in the month)

Check out our savings account comparison table to see the rest of the deals in the market.

Term deposit rates are also continuing to fall lately, with shorter terms taking the hardest hits, although savvy savers can still find some good returns if they know where to look.

Best term deposits

• 1 year - 3.00% - Teachers Mutual Bank, Unibank
• 2 year - 3.20% - Greater Bank, Maitland Mutual Building Society
• 3 year - 3.30% - Greater Bank, Maitland Mutual Building Society
• 4 year - 3.40% - Greater Bank
• 5 year - 3.50% - Greater Bank

Find other term deposit options with our term deposit search tool.