RBA leaves cash rate at 0.25%. What's the outlook for home loans?

The Reserve Bank of Australia kept interest rates unchanged at its latest policy meeting, as the country continues to grapple with the fallout from the coronavirus pandemic. 

While the economy is performing better than initially feared, the Board once again urged the government to maintain the flow of support to households and businesses, which is scheduled to expire in September.

To its credit, the government recently hinted at a future multibillion-dollar package to help small businesses stay afloat beyond the pandemic, or assist operators of troubled firms to start new businesses.

RBA Governor Philip Lowe also acknowledged that there have been some positive developments - including a pick-up in retail spending - but the overall economic outlook remains uncertain and “recovery is expected to be bumpy.”

The situation has also been worsened by the recent surge of infections in Victoria, which has led to closures of the NSW-Victorian border and placed parts of the state under strict lockdown. 

Failure to contain the spread could plunge the economy back into hibernation — and potentially deal a greater blow to consumer and business confidence than the initial outbreak.

As expected, the cash rate and three-year yield target were kept unchanged at 0.25%. The Board has made clear that both will remain at their current setting until employment recovers and inflation is within the 2-3% target range.

As for its bond purchasing program, activity has been kept to a minimum since the initial round of purchases back in March. To date, $50 billion in government bonds has been bought.

Where do home loans rates currently sit?

Banks and lenders continue to sharpen home loan rates to attract borrowers. Right now, the average 2-year fixed rate among lenders in our database is 2.56% p.a., while the average variable rate sits at 3.42% p.a.

We’re also beginning to see home loan rates dip below the 2% mark. In June, Bank of Us introduced the Special FlexiDiscount Home Loan, which offers fixed rates as low as 1.99% p.a. (2.64% p.a. comparison rate*). However, this is only available to residents of Tasmania.

While this could offer some clue into what’s in store for home loans, Mozo’s banking expert Peter Marshall suggests there’s not much more room to cut, and in the future we’ll likely see lenders competing via one-off cashback offers rather than direct rate discounting.

“I think there's going to continue to be a lot of competition out there, but it seems to me that rates are probably very close to as low as lenders would want to take them,” he said. 

How about savings accounts and term deposits?

Of course, the flipside to all this is it’s becoming harder for Australians to find a worthwhile place to park their savings. Currently, the average ongoing savings rate (on balances of $10,000) among providers we track sits at 0.70% p.a.

86 400, Bank of Queensland and Up continue to offer ongoing bonus rates of 1.85% p.a., so long as account holders satisfy certain monthly conditions, and Macquarie offers an introductory rate of 2.00% p.a. which is available for four months (before reverting to 1.35% p.a.). 

Meanwhile, the current highest base rate in our database is 1.65% p.a., offered by the Volt Savings Account. This is available on balances up to $245,000 and doesn’t require account holders meet any monthly requirements to be eligible.

As for term deposits, 64 out of 82 providers in our database made reductions to at least one term last month, leaving the average 12 month term deposit rate at just 1.11% p.a. — a 14 basis point drop from the previous month. 

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

Top home loans - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 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. variable
    2.47% 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. Winner of two Mozo Expert's Choice Awards for 2021.

    Go to site
    Details
  • placeholder
    UHomeLoan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.
    fixed 3 years
    2.24% p.a.

    $0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.

    Go to site
    Details
  • placeholder
    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid off. Free extra repayments and redraw facility. Zero fees to consider. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

    Go to site
    Details
  • placeholder
    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 3 years
    2.43% 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.

    Go to site
    Details
  • placeholder
    Mozo Experts Choice 2021
    Variable Home Loan Special

    Owner Occupier, Principal & Interest, LVR <70%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a. variable
    2.12% p.a.

    Yard’s low-rate variable special home loan is packed with all features – unlimited additional repayments, free redraw, 100% offset account. Enjoy a simple online application. Special rate applies to home loan applications submitted by 31st May 2021. Low Cost Home Loan winner in the Mozo Expert's Choice Awards for 2021.

    Go to site
    Details

*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, loan amount and term entered. 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.

^See information about the Mozo Experts Choice Home Loans Awards

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.