RBA September decision: Interest rates remain stable at 1.50%

Spring may have sprung but there was no seasonal change for the official cash rate as the RBA board left interest rates at a record low 1.50% following today’s meeting in Sydney.

The announcement, which will have come as little surprise to experts, means the official cash rate has remained on hold at 1.50% for 23 consecutive meetings - over two years since it was last cut from 1.75% in August 2016.

According to RBA Governor Philip Low, the low level of interest rates are continuing to provide support to the Australian economy.

"Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," he said. 

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So what lies ahead when rates do eventually move?

Given the steady stream of hints dropped by RBA Governor, Philip Lowe, in recent months, the Reserve Bank clearly currently favours a future rise in the official cash rate.

But according to Mozo Data Manager, Peter Marshall, a downturn in a number of key economic indicators could force the RBA’s hand in the opposite direction.

“The most likely scenario over the next couple of years is for rates to remain flat. But there could be enough pressure over the next six months which forces the RBA to take the brakes off the economy a little and provide some stimulus, while also giving people a bit of a break,” he said. 

“It’s possible that if the economy starts weakening, which isn’t out of the question because we may well be at a peak at the moment in terms of economic activity and strength, and the remaining big banks follow Westpac’s decision to lift rates out of cycle, the RBA may feel like it has no choice but to cut rates.”

The state of rates: A winter of hikes

In opposite fashion to the official cash rate, variable home loan rates have continued to be pushed higher by a number of lenders since the last RBA meeting in August, with Westpac’s announcement last Wednesday to hike variables rates across the board an unsurprising end to a winter of rate rises.

According to figures from the Mozo database, 27 lenders have increased or announced increases to variable rates across the board since June 1. And given Westpac’s recent move to lift rates by 14 basis points, it’s likely to be just a matter of time before the other major banks join in.

“The banks have been absorbing increased funding costs for the last six months so unless the funding cost situation rapidly improves, they are going to have to come up with a way of recovering those costs or accept a lower profit figure,” said Marshall.

“I don’t see any other course of action for them other than increasing rates, so I would be astounded if NAB, ANZ or the Commonwealth Bank decide not to move in the near future.”

While rates from many lenders have been on the rise, here are some of the lowest home loan rates currently* in the Mozo database:

Best variable rate home loan offers

• Reduce Home Loans Rate Lovers Variable Home Loan - 3.44% (comparison rate: 3.51%**)
• Easy Street Standard Variable - 3.49% (comparison rate: 3.53%**)
• Freedomlend Variable Home Loan - 3.54% (comparison rate: 3.55%**)
• Homestar Variable Rate Loan - 3.54% (comparison rate: 3.59%**)
  

Best fixed rate home loan offers

• 1 year: Greater Bank Ultimate Home Loan (Fixed, Package) - 3.49% (comparison rate: 4.57%**)
  
• 2 year: Tic:Toc Fixed Home Loan - 3.64% (comparison rate: 3.65%**)
  
• 3 year: Easy Street Fixed Home Loan - 3.69% (comparison rate: 4.11%**) and Community First Credit Union Fixed Rate Home Loan - 3.69 (comparison rate: 4.93%**)
  
• 4 year: FreedomLend Fixed Home Loan 3.92% (comparison rate: 4.30%**) and ING Fixed Rate Loan - 3.92% (comparison rate: 4.52%**)
  
• 5 year: ING Fixed Rate Loan - 3.98% (comparison rate: 4.49%**)

Top term deposit rates track back  

There has been a steady uptick in term deposit rates since the early part of 2018, with the Mozo database recording six straight months in which the number of rate increases have outnumbered rate decreases.

However, rates at the top of the market proved to retreat slightly in August. RaboDirect cut it’s market leading four year (now 3.20%) and five year (now 3.40%) term offers by 10 basis points respectively, although both remain the top offers in the Mozo database.

In the world of savings accounts the news has been consistently bad of late for Aussie savers, and nothing much changed in that respect over the last month, with the Mozo database recording further cuts to base rates.

Although, introductory savings account rates have been trending in the opposite direction. In fact, HSBC’s 10 basis point improvement to its Serious Saver account means that it is now the highest introductory rate in the Mozo database at 3.10% for the first four months.

Best ongoing savings account bonus offers*

• RAMS Saver Account - 3.00% (when you deposit at least $200 and make no withdrawals each month)
• UBank USaver with Ultra Transaction Account- 2.87% (when you deposit a at least $200 into the account or a linked Ultra Transaction Account each month)
• ME Online Savings Account - 2.85% (when you make a weekly tap and go purchase using a linked ME Everyday Transaction Account Debit MasterCard)
• Australian Unity Active Saver - 2.80% (when you make a minimum deposit of $250 and no withdrawals every month)
• ING Savings Maximiser - 2.80% (when you deposit at least $1,000 each month from a linked Orange Everyday account as well as make at least five purchases on your credit or debit card)
  

Best term deposit offers (based on a balance of $25,000)*       

• 1 Year: 3.00% - Teachers Mutual Bank, UniBank
  
• 2 Year: 3.00% - Greater Bank, ING, Maitland Mutual
  
• 3 Year: 3.05% - Greater Bank, Maitland Mutual
  
• 4 Year: 3.20% - RaboDirect
  
• 5 Year: 3.40% - RaboDirect

RELATED: Home loan competition heats up as cashback deals hit $3,000

Want to compare a range of other great banking offers? Make life easier for yourself by comparing home loans, savings accounts, term deposits and a heap of other banking products with Mozo’s handy comparison tables.

*Rates accurate as of September 4, 2018.

**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.