Latest interest rates: Cash rate held, but home loans, savings & term deposits lower

The Reserve Bank board voted to keep the cash rate unchanged today. But with the official rate already so low, Canstar reveals how consumer interest rates fared in the past month.
Image: Immersion Imagery (Shutterstock)

The cash rate will remain on hold at the historic low of 0.25% and unconventional monetary policy measures announced in March – such as buying government bonds – will remain in place to help support jobs, income and businesses during the coronavirus pandemic.

RBA Governor Philip Lowe said in a statement today that the central bank’s monetary response, combined with the government’s relief measures, would help soften the blow of what is expected to be a “very large economic contraction” in the June quarter and the highest unemployment rate for many years.

“These various responses are providing considerable support to Australian households and businesses through what is a very difficult period,” Dr Lowe said. “The Australian financial system is resilient.”

He said the cash rate would not be increased until there was more progress towards its employment and inflation targets.

The last moves to the cash rate were two cuts in March, following which Canstar noticed a number of consumer interest rates for both savers and borrowers trend lower as well.

Canstar finance expert Steve Mickenbecker said banks approached the out-of-cycle March cash rate cut as the last move for some time, and as a result generally held home loan rates steady for existing customers.

“Some of the banks instead introduced sharp fixed home loan rates, big cuts to small business rates, increases to some term deposit rates, but at the same time many cut base savings account rates to rock bottom,” Mr Mickenbecker said.

“Another cut to the cash rate would put the banks under massive pressure and it is easy to see that they have left themselves with little room to move.”

With rates so low, he said Australians could do a few things to help themselves at this time, including asking your bank for help if you need it, making sure you’re not paying a high interest rate on your home loan, chasing competitive savings rates and spending the time at home to work on your budget.

Here’s a summary of some of the key changes to consumer interest rates in March, recorded on Canstar’s database.

Home loan rate movements in March

Since the start of March, the major banks cut variable home loan interest rates by an average of 0.29 percentage points, while the rest of the home loan market cut rates by an average of 0.24 percentage points.

Just before the RBA announcement today, the Commonwealth Bank moved to reduce some of its variable rate loans, with its basic variable rate home loan cut by 0.28 percentage points to 2.79% (comparison rate 2.80%) for owner-occupiers paying principal and interest and with a 20.01-30% deposit.

The vast majority of home loan rate reductions over March were to fixed products, with more than 1,400 decreases compared to around 650 cuts to variable loans. Fixed loans for owner-occupiers and investors were reduced by an average of 0.46 percentage points, while variable loans were cut by an average of 0.25 percentage points.

The lowest variable rate for owner occupiers paying principal and interest is now 2.39% from Reduce Home Loans (comparison rate 2.40%), while the lowest fixed rate is 2.09% at FreedomLend, ING and Reduce Home Loans across multiple fixed terms (comparison rates vary).

The comparison tables below display some of the variable rate home loan products on Canstar’s database with links to lenders’ websites, for borrowers in NSW making principal and interest repayments on a loan of $350,000 with an 80% LVR. You can choose between the refinance, first home and investing tabs to view results most relevant to you. The results are sorted by ‘current rate’ (lowest to highest). Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products.

Lowest interest rates for refinance home loans

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

Lowest interest rates for first home loans

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

Lowest interest rates for investing home loans

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

Savings account rate movements in March

Mr Mickenbecker said if consumers were looking to make the most out of their savings, they’d be better off chasing competitive rates than stashing the cash under the mattress where it won’t earn any interest. Here’s how savings account rates changed in March.

What happened with ongoing savings rates?

Ongoing savings rates or ‘base’ rates – where customers typically don’t need to meet conditions to earn the ongoing interest rate – were cut by an average of 0.04 percentage points by the major banks in March, while the rest of the market reduced base savings rates by 0.25 percentage points on average.

Looking at the promotional interest rates that can be earned on savings accounts, the majors cut by an average of 0.32 percentage points and the rest of the market reduced by an average of 0.13 percentage points.

What this means is that savers can now earn up to 1.65% in an ongoing savings account at Volt Bank, or up to 2.65% at Macquarie Bank (for up to four months) if they’re willing to move their money regularly to chase the introductory rates that some providers offer.

What happened with bonus savings rates?

Bonus savings account rates – where bonus interest is paid each month if customers meet certain conditions – were cut by an average of 0.31 percentage points by the major banks in March, and 0.29 percentage points by the rest of the market on average.

When it comes to bonus savings accounts, people who meet the conditions can currently earn up to 2% at 86 400, Bank of Queensland or MyState, with the average rate being 1.27%.

Term deposit rate movements in March

Similar to the trend in savings accounts, term deposits were not immune to rate reductions in March, with 372 cuts made in total. On a positive note, there were more than 50 increases to term deposit rates over the same period.

As shown in the table below, savers can earn up to 2.15% by locking their money away in a term deposit for a one-year term.

The average interest rate on our database for a one-year term deposit is 1.38%.

Top 5 12-Month Term Deposits
Bank Product Rate
Judo Bank Personal Term Deposit 2.15%
CUA Term Deposit 2.00%
Firstmac Term Deposit 1.95%
ING Term Deposit 1.85%
MyState Bank Regular/Online Term Deposit 1.85%
Source:  www.canstar.com.au – 3/04/2020; 2pm (AEST). Based on non-compounding 12 month term deposits on Canstar’s database with interest paid at maturity, available for a deposit amount of $10,000.  Table displays one product per institution. Table sorted in descending order by Rate, followed by alphabetically by Bank.

Looking at longer terms, savers can also earn up to 2.15% per year on a five-year deposit, based on a $10,000 deposit, with the average rate on a five-year term deposit currently sitting at 1.18% per year.

Follow Canstar on Facebook and Twitter for regular financial updates.

As with all our content, Canstar’s Coronavirus coverage will always be free for our readers.

Share this article