RBA holds cash rate as coronavirus surge puts Victorian economy in a stranglehold

The Reserve Bank of Australia left official interest rates unchanged at its August meeting this afternoon, as Victoria contends with a second wave of coronavirus infections that has put the entire country on high alert.

The worsening situation has created a fresh batch of problems for RBA Governor Philip Lowe, who only last month was touting declining infection rates and a much-needed pick-up in consumer confidence. 

In his post-meeting statement, Lowe said recovery is likely to be “uneven and bumpy.” 

He outlined a baseline scenario in which GDP falls by 6% over the year before growing by 5% in 2021. Fuelled by the recent outbreak in Victoria, unemployment is expected to reach 10% later in 2020.

“A stronger recovery is possible if progress is made in containing the virus in the near future. This progress would support an improvement in confidence and a less cautious approach by households and businesses to their spending,” he said.

“On the other hand, if Australia and other countries were to experience further widespread lockdowns, the recovery in both output and the labour market would be delayed.”

Lowe also mentioned the crucial role fiscal policy has played in keeping the economy afloat.

“The Australian Government's recent announcement that various income support measures will be extended is a welcome development and will support aggregate demand,” he said.

“It is likely that fiscal and monetary stimulus will be required for some time given the outlook for the economy and the labour market.”

As for the Board’s bond purchasing activities, the yield on 3-year Australian Government Securities has crept slightly higher than the target of 25 basis points, and the Board will recommence purchases in the secondary market tomorrow.

In Victoria, the unfolding crisis will result in around 250,000 workers being stood down or sent home. They will join a further 250,000 Victorians who have been stood down since the onset of the pandemic.

According to NAB economists, just three and a half weeks of lockdown will strip the economy of around $1.9 billion. The expected impact will be detailed in the RBA’s economic forecast, due out on Friday.

What’s the outlook for home loans?

Cuts continue to flow through from lenders, with the majority applied to fixed rates. Among lenders we track, the average variable home loan rate is 3.39% p.a., while the average fixed rate sits at 2.58% p.a. for 1-year terms, 2.54% p.a. for 2-year terms, and 2.62% p.a. for 3-year terms.

Last month also saw the rollout of a few home loans with headline rates below 2.00%. First was loans.com.au’s Smart Booster Home loan, which comes with a discounted 1.99% p.a. variable rate (2.55% p.a. comparison rate*) for one year before reverting to a still competitive 2.57% p.a.

Online lender Homestar followed suit with its Star Classic Owner Occupied Special, which offers borrowers a 1.98% p.a. fixed rate (2.51% p.a. comparison rate*) for one year. The loan reverts to a 2.49% p.a. variable rate (2.51% p.a. comparison rate*) once the fixed term ends.

Mozo Director Kirsty Lamont said the existence of such low rates should have borrowers looking at their current home loan and asking if they’re paying much more than they should be.

“If you’re confident you won’t have to sell your property in the next 12 months, fixing your loan and paying principal and interest will give you access to very competitive rates,” she said. 

“It’s worth remembering though that if you need to break your loan before the end of the fixed period you can be slugged with significant break fees.”  

What about savings accounts and term deposits?

Of course, the flipside to all this is that Australians will have to work much harder when looking for somewhere to keep their savings. 

Currently, the average 12-month term deposit rate sits at 0.98% p.a. Meanwhile, the average ongoing savings rate is only 0.68% p.a., down from 0.74% p.a. one month ago. 

One saving grace has been the introduction of the Westpac Life account, which offers Australians aged between 18 and 29 a remarkable 3.00% p.a. on their savings. 

Importantly, the maximum rate is only available on balances up to $30,000, and account holders will have to satisfy a few monthly conditions, namely grow their balance, make at least one deposit, and make at least five transactions with a linked Westpac Choice debit card. 

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.

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 search our database of 473 home loans.
Last updated 19 June 2024 Important disclosures and comparison rate warning*
  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    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.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    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.

  • Discount Variable Home Loan

    • Owner Occupier
    • LVR<70%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.01 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

  • Variable Home Loan 90

    • Principal and Interest
    • LVR <90%
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.06 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • Fixed Rate Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Fixed 3 years
    Comparison rate
    6.15 % p.a.
    Initial monthly repayment
    $3,027

    Additional repayments of up to $10K per fixed year. Interest rate discounts available. Waiver of $499 application fee when combined with an Orange Advantage Home Loan.

  • The Better Home Loan Special Offer

    • Owner Occupier
    • Principal & Interest
    • LVR<80%
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.59 % p.a.
    Fixed 3 years
    Comparison rate
    7.06 % p.a.
    Initial monthly repayment
    $3,190

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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.