RBA holds off on interest rate cut at May meeting

By Tom Watson · · 4 min read
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Despite intense speculation surrounding the possibility of a May rate cut, the Reserve Bank Board has once again maintained the status quo by holding the official cash rate at 1.50% at it’s monthly meeting in Sydney this afternoon.

The decision marks a 30th consecutive meeting since interest rates last moved, with Aussies needing to stretch their minds back to the RBA’s August 2016 meeting for the last time the Board cut rates from 1.75% to 1.50%.

In his post-meeting statement, RBA Governor Philip Lowe commented on the most recent inflation figures, as well as why the board decided to hold rates steady. 

"The inflation data for the March quarter were noticeably lower than expected and suggest subdued inflationary pressures across much of the economy," he said. 

"The Board judged that it was appropriate to hold the stance of policy unchanged at this meeting. In doing so, it recognised that there was still spare capacity in the economy and that a further improvement in the labour market was likely to be needed for inflation to be consistent with the target."

RELATED: Lenders slash rates ahead of Reserve Bank decision

While the Reserve Bank Board may have kept their guns holstered this time around, Mozo Product Data Manager, Peter Marshall, suggests that it is most likely only a matter of time until they do pull the trigger and cut rates.  

“The RBA is a very cautious organisation, so they won’t want to do anything too abruptly without paving the way for it first. That means setting the tone for a possible cut, which they’ve only just started to do,” said Marshall.    

“One factor that might be holding them back is the strong unemployment rate, so there's a good chance that they'll wait for the next unemployment figure to come out before finally acting - if it’s not positive.” 

Not a matter of it, but when  

According to the ASX’s RBA Rate Indicator for May 6, there was a 51% chance of an interest rate cut at today’s meeting - a figure which has hovered around the 40-60% mark for the past fortnight.

And with a number of uninspiring economic indicators including a weakening economy, falling housing market and most recently, below target inflation figures, the belief that a rate cut is coming is one shared by many commentators.

“A lot of pundits brought forward their predictions of a rate cut to May on the back of the recent CPI figures, so while I never ruled a cut in today’s meeting out of contention, I thought the RBA were more likely to move in June or even July,” said Marshall.

So if the Reserve Bank Board does decide to cut rates next month, what kind of response can Australians expect from their banks?

The Mozo database has been recording possible signs for months that banks are anticipating a future drop in the official cash rate, with a host of fixed home loan and term deposit rates slashed in recent months. But what about variable rate home loans and savings accounts?

“If a cut does come, it’s very unlikely that lenders will pass on the full 25 basis points to their mortgage borrowers. There's some pressure coming as a result of the Royal Commission, so we could be pleasantly surprised, but I think it's more likely that they keep somewhere around half of it for themselves,” said Marshall.

“Savers won’t be so lucky though, as I fully expect that banks won’t hesitate to pass on any cut to savings accounts in full.”

RELATED: Term deposits or savings accounts: where to park your inheritance revealed

For now, here are some of the top variable home loan and savings account rates in the Mozo database.*

Low variable rate home loan offers*

The following offers are basic variable home loans with or without an offset account and based on an LVR of at least 80%. Check out each product’s respective review (linked) for more information on fees and features.

RateLenderLoan
3.44% (3.54% comparison rate**)FreedomLendVariable Home Loan
3.47% (3.51% comparison rate**)ReduceRate Lovers Variable
3.48% (3.51% comparison rate**)loans.com.auSmart Home Loan
3.48% (3.66% comparison rate**)Mortgage HouseAdvanced Home Loan
3.49% (3.55% comparison rate**)Well Home LoansWell Balanced

High bonus rate savings account offers*

The following ongoing bonus rate savings account offers each come with minimum requirements, so check out the linked reviews for more information. 

RateBankAccount
3.00%BOQFast Track Saver Account
2.90%CUAeSaver Extra
2.90%MOVE BankBonus Saver
2.87%UBankUSaver with Ultra Transaction Account
2.85%MEOnline Savings Account

Want to compare even more offers for yourself? Don’t wait! Mozo’s home loan, savings account and term deposit comparison tables make it easy to view a range of rates and features all in the one place.  

*Rates accurate as of May 7, 2019.
**WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

Read last month's Reserve Bank interest rates update.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can compare more home loans here.
Last updated 27 July 2024 Important disclosures and comparison rate warning*

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    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

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    $3,027
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    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

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image of houses

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.