Downturn might not be as severe as expected, says RBA in June meeting
The RBA continues to monitor the current downturn as it unfolds, with Governor Philip Lowe confirming that both fiscal and monetary policy decisions are working as intended.
“Over the past month, infection rates have declined in many countries and there has been some easing of restrictions on activity,” he said.
“If this continues, a recovery in the global economy will get under way, supported by both the large fiscal packages and the significant easing in monetary policies.”
While the economy is tracking better than expected, the RBA still expects a contraction of up to 10% over the June quarter. How soon domestic conditions will recover depends on how quickly Australians can regain confidence in their finances.
Consumer spending fell dramatically as a result of the economic shutdown. The fear now is that even once the virus is contained and restrictions are lifted, the cautiousness that many are exhibiting will persist.
The drop-off in business investment will be another sticking point. In its quarterly outlook released last month, the Board said uncertainty stemming from the pandemic has led many firms to defer or cancel non-essential capital expenditure.
RELATED: RBA Governor warns against cutting off JobKeeper prematurely
As expected, the cash rate was held at the record low of 0.25%. The RBA has repeatedly said that official interest rates will remain at their current levels until inflation is within the 2-3% target range and progress is made towards full employment.
But some prominent voices have called on the RBA to rethink its position. Westpac chief economist Bill Evans recently urged the Board to take interest rates negative to allow mortgage holders and businesses to borrow at even lower costs.
As for the RBA’s bond purchasing program, activity has been dialled back considerably, with the Board purchasing government securities on only one occasion since its last meeting.
“The Bank is prepared to scale-up its bond purchases again and will do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for 3-year AGS,” Lowe said.
“The target will remain in place until progress is being made towards the goals for full employment and inflation.”
The big question now is whether Australia is technically in the midst of a recession. While the economy is expected to shrink over the June quarter, there’s still some uncertainty about the previous one. We’ll have a verdict on Wednesday with the release of the GDP report.
What’s the outlook for home loans?
The current interest rate setting has put mortgage rates at all-time lows. Among providers in our database, the average 2-year fixed home loan rate sits at 2.98% p.a., while the average variable rate is slightly higher at 3.43% p.a.
Cuts from lenders have flowed through continuously since March, with the majority levelled against fixed rate options. Over the last two months, Mozo recorded 578 cases of lenders reducing fixed rates.
At the time of writing, the lowest fixed rate in our database is 2.19% p.a., which is offered by a number of lenders, including Well Home Loans (2.44% p.a. comparison rate*), Reduce Home Loans (2.54% p.a. comparison rate*), and ING (3.79% p.a. comparison rate*).
What about savings accounts?
Among providers we track, 87 have lowered their at-call savings rates since March, leaving the market average at a paltry 0.74% p.a. 86 400, Bank of Queensland and Up Bank currently offer the joint highest ongoing bonus rate at 1.85% p.a. — 1.11% higher than average.
If we consider just the big banks, the average savings rate sits at just 0.36% p.a. Out of the four, Westpac offers the highest ongoing rate at 1.05% p.a., available so long as account holders make at least one deposit per month and have a higher balance than at the beginning of the month.
For those who don’t mind parting with their savings for an extended period of time, term deposits are a good way to hedge against further interest rate cuts.
Judo Bank currently offers rates between 1.65% p.a. and 2.15% p.a. on 1 year to 5 terms. For those after short-term investment options, Qudos Bank’s rates go as high as 1.80% p.a. on 3 to 12 month terms.
For more information, visit our home loan, savings account and term deposit comparison pages. And if you’re after tips to keep your finances in good health amid the current crisis, browse our coronavirus financial guide.
Read last month's Reserve Bank interest rates update.
Top home loans - last updated February 27, 2021
Smart Booster Home Loan
1 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR
interest rate
comparison rate
Initial monthly repayment
1.99% p.a.variable for 12 months and then 2.48% p.a. variable2.47% p.a.A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required.
CompareCompareSmart Booster Home Loan
A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required.
- interest rate
- 1.99% p.a.variable for 12 months and then 2.48% p.a. variable
- comparison rate
- 2.47% p.a.
- Upfront fees
- $520
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- Optional - with 0.10% additional interest
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $50,000
- maximum borrowing amount
- $1,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Smart Booster Home Loan
Basic Home Loan
Fixed, Owner Occupier, Principal & Interest, LVR 70-80%
interest rate
comparison rate
Initial monthly repayment
2.09% p.a.
fixed 2 years2.56% p.a.Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.
CompareCompareBasic Home Loan
Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.
- interest rate
- 2.09% p.a.
fixed 2 years
- comparison rate
- 2.56% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $750,000
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Basic Home Loan
UHomeLoan - Discount Offer
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
2.34% p.a. variable2.34% p.a.Enjoy a super low rate, $0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Free redraw with flexible repayments. Min 20% deposit.
CompareCompareUHomeLoan - Discount Offer
Enjoy a super low rate, $0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Free redraw with flexible repayments. Min 20% deposit.
- interest rate
- 2.34% p.a. variable
- comparison rate
- 2.34% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $100,000
- maximum borrowing amount
- -
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the UHomeLoan - Discount Offer
Celebrate Variable Home Loan
<60% LVR, Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
2.19% p.a. variable2.19% p.a.Fast online application with no fees. Free extra repayments and redraw facility. Min 40% deposit. Crowned Best New Home Loan for 2020 by the Mozo Experts.^
CompareCompareCelebrate Variable Home Loan
Fast online application with no fees. Free extra repayments and redraw facility. Min 40% deposit. Crowned Best New Home Loan for 2020 by the Mozo Experts.^
- interest rate
- 2.19% p.a. variable
- comparison rate
- 2.19% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $100,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Celebrate Variable Home Loan
Special Fixed Rate Home Loan
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
1.99% p.a.
fixed 4 years3.45% p.a.Ability to split your loan between fixed and variable. $2,000 cashback offer for investor & owner occupied home loans over $250k with LVR ≤80% when refinancing to Newcastle Permanent. Limited time offer extended, T&Cs apply
CompareCompareSpecial Fixed Rate Home Loan
Ability to split your loan between fixed and variable. $2,000 cashback offer for investor & owner occupied home loans over $250k with LVR ≤80% when refinancing to Newcastle Permanent. Limited time offer extended, T&Cs apply
- interest rate
- 1.99% p.a.
fixed 4 years
- comparison rate
- 3.45% p.a.
- Upfront fees
- $0
- Ongoing fees
- $395.00 yearly
- Discharge Fee
- $0.00
- Extra repayments
- yes - free up to $25,000 p.a.
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $5,000
- maximum borrowing amount
- -
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- $2,000 cashback when you refinance your home loan from another financial institution when you apply by 31 March 2021 and are funded by 31 May 2021, min $250k, LVR
Read our Mozo Review to learn more about the Special Fixed Rate Home Loan
^See information about the Mozo Experts Choice Home Loans Awards
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