RBA keeps cash rate steady in July meeting

The Reserve Bank of Australia handed down its latest monetary policy decision this afternoon, keeping official interest rates steady at 0.1 per cent while announcing key changes to the rest of its support program.

“The economic recovery in Australia is stronger than earlier expected and is forecast to continue,” RBA governor Philip Lowe said in his post-meeting statement.

“The outlook for investment has improved and household and business balance sheets are generally in good shape.”

While recent lockdowns have dampened sentiment, the labor market has strengthened in recent months and there are promising signs of inflationary pressures, though it remains to be seen if these are transitory.

Given the diminished need for ongoing stimulus, Lowe said the Bank will be adopting a more flexible approach to its bond purchase program.

“The Bank will continue to purchase bonds given that we remain some distance from the inflation and employment objectives,” he said.

“However, the Board is responding to the stronger-than-expected economic recovery and the improved outlook by adjusting the weekly amount purchased.

“It will conduct a further review in November, allowing the Board to respond to the state of the economy at that time.”

Lowe also revealed the Bank will maintain the yield target on 3-year government bonds, which was set at 0.25 per cent in March last year before being lowered to 0.1 per cent in November.

The RBA is determined to bring inflation within 2 to 3 per cent, but for that to happen wage growth will need to break free from its current rut. 

Further information on the Bank’s decision will be provided by Lowe in a rare press conference at 4 pm today, his third since taking on the role of governor in 2016.

Where do home loan rates currently sit?

Since the pandemic hit, the RBA has relied on a number of unconventional policy tools, taking official interest rates to historic lows and buying up billions of dollars worth of bonds as part of its quantitative easing program.

These stimulus measures have flooded the economy with cheap cash and brought mortgage rates to all-time lows. But banks have already begun factoring a tightening of monetary policy into their pricing decisions.

Since fixed rates take into account the future interest rate landscape, they tend to move before variable rates. So far, the majority of changes we’ve recorded have been increases to 4 and 5-year offers.

While there are still a number of competitive rates available, they may not be around for much longer. At the time of writing, the top fixed rate offers among lenders we track are:

• 1-year: bcu Fixed Rate | 1.67% p.a. (3.84% p.a. comparison rate*)

• 2-year: bcu Fixed Rate | 1.78% p.a. (3.67% p.a. comparison rate*)

• 3-year: Credit Union SA Special Offer| 1.79% p.a. (3.33% p.a. comparison rate*)

• 4-year: BankVic Fixed Rate | 1.95% p.a. (3.50% p.a. comparison rate*)

• 5-year: UBank UHomeLoan | 2.24% p.a. (2.33% p.a. comparison rate*)

With fixed rates on their way up, a number of lenders have taken to sharpening their variable rates to get customers in the door. Among lenders in our database, the average variable rate is 3.22% p.a. for owner occupiers and 3.63% p.a. for investors.

For more information about interest rates, visit our home loan statistics page. And if you’re in the market for a home loan, browse our home loans comparison page, where you’ll be able to filter your search by rate and type.