RBA cash rate held: Are we nearing the end of record-low fixed rates?


The official cash rate is on hold but the Reserve Bank’s other measures that are helping keep fixed home loan interest rates at record lows could be nearing the end of the road. Now could be a “golden opportunity” for refinancers to secure a low rate.

Reserve Bank of Australia
Is now a “golden opportunity” for refinancers to lock in a low fixed rate? Image source: Rose Makin, Shutterstock.

The Reserve Bank of Australia (RBA) board decided to leave the cash rate on hold today at the historic low of 0.10%, at the board’s first meeting for 2021.

The record-low cash rate has helped keep home loan interest rates down, with UBank recently introducing the lowest rate recorded in Canstar’s database.

Fixed rates in particular have been supported by a three-year line of credit from the RBA to banks, at an extremely low rate of 0.10% since November, which provides the banks with a cheap form of funding to lend money to consumers.

The thing is, that cheap form of funding is due to expire at the end of June, or even sooner if banks fully draw down on the funding available to them.

Canstar finance expert Steve Mickenbecker said this meant refinancers in particular were now facing a “golden opportunity” to secure record-low fixed rates.

“The expiry of that line of credit from the RBA – whether it’s at the end of June or earlier when the money runs out – I see that as putting a time horizon on the period during which we’ll see the lowest fixed rates,” Mr Mickenbecker said.

“I wouldn’t be surprised at all to see the big banks reprice their fixed rates come the end of that line of credit.”

In the meantime though, he said there could still be a little room for home loan rates to get lower.

RBA Governor Philip Lowe said today the board doesn’t expect to be able to increase the cash rate again until 2024 “at the earliest”, with wages increasing at the slowest rate on record.

The central bank also committed to a further $100 billion of quantitative easing in the form of government bond purchases, once the existing program finishes in mid-April.

↓ What about savings rates? Keep reading

Where can you find the lowest home loan rates?

Even though the cash rate has been steady so far this year, Canstar data shows banks have been cutting home loan rates.

We’ve already seen 16 lenders on our database cut home loan interest rates since 1 January, by an average of 0.18 percentage points on variable loans and 0.24 percentage points on fixed loans, including:

  • Community First Credit Union
  • Credit Union SA
  • Easy Street Financial Services
  • Freedom Lend
  • Homestar Finance
  • HSBC
  • IMB
  • Liberty Financial
  • ME
  • MOVE Bank
  • Newcastle Permanent
  • People’s Choice Credit Union
  • Summerland Credit Union
  • UBank

The below table shows where consumers can find some of the lowest home loan interest rates on Canstar’s database right now.

Top 5 lowest home loan interest rates on Canstar’s database

Lender Loan LVRs Allowed Rate Comparison Rate
UBank UHomeLoan Fixed P&I 3 yrs Up to 80% 1.75% 2.22%
Reduce Home Loans Rate Cutter Variable <60% Up to 60% 1.77% 1.83%
Homestar Finance Star Gold Home Loan <60% Up to 60% 1.79% 1.84%
HSBC Home Loan Package Owner Occupier Fixed P&I 2 yrs <80% Up to 80% 1.88% 2.86%
Pacific Mortgage Group Variable P&I <60% Up to 60% 1.89% 1.89%

Source: www.canstar.com.au – 2/02/2021. Based on owner-occupier home loans on Canstar’s database for a loan amount of $400,000 and principal & interest repayments. Excludes first home buyer-only loans. Comparison rates calculated based on a $150,000 loan amount over a total loan term of 25 years. Top 5 selected and table sorted in ascending order by rate, followed by comparison rate. LVR (loan-to-value ratio) refers to the home loan amount as a percentage of the property’s value. 

What’s happening with savings account rates?

Mr Mickenbecker said the banks are content to just hold onto their savings customers at the moment, with many not keen to pay savers much more than 0.25% interest.

“Banks have looked at the situation and decided that with wholesale rates so cheap, they can fund the book on wholesales and not have to pay as much as they might for expensive consumer deposits,” he said.

So far this year, Canstar’s database has recorded savings rate cuts from 24 providers of savings accounts, including three of the four major banks, by an average of 0.12 percentage points.

The list of banks to cut savings rates so far in 2021 includes:

  • Australian Unity
  • Bank of China
  • Bank of us
  • Commonwealth Bank
  • Endeavour Mutual Bank
  • G&C Mutual Bank
  • Geelong Bank
  • Greater Bank
  • Heritage Bank
  • HSBC
  • Macquarie Credit Union
  • MOVE Bank
  • MyState Bank
  • NAB
  • Qudos Bank
  • Suncorp Bank
  • Sydney Mutual Bank
  • Teachers Mutual Bank and UniBank
  • The Mutual Bank
  • Westpac and its subsidiaries: Bank of Melbourne, BankSA and St.George Bank

Top 5 highest savings interest rates on Canstar’s database

Provider Account Base Rate Bonus Rate Promo Rate Total Rate
Rabobank Australia High Interest Savings Account 0.30% 1.45% 1.75%
Macquarie Bank Savings Account 1.20% 0.15% 1.35%
ING Savings Maximiser 0.05% 1.30%^ 1.35%
Heritage Bank Online Saver 0.65% 0.65% 1.30%
Bank of China Online Saver 0.40% 0.90% 1.30%

Source: www.canstar.com.au – 2/02/2021. Based on savings accounts on Canstar’s database available for a deposit of $10,000. Bonus rate refers to a conditional bonus rate that is applied when certain conditions are met. Promo rate refers to an introductory promotional rate available for a limited time from application. Refer to the provider for more details on its bonus and promotional rates. Table sorted in descending order by total rate, followed by base rate. ^The ING Savings Maximiser account’s bonus interest conditions will change from 1 March, 2021.

This article was reviewed by our Sub Editor Tom Letts before it was published, as part of our fact-checking process.

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The comparison table below shows some of the savings accounts on Canstar’s database for a regular saver in NSW. The results shown are based on an investment of $100,000 in a personal savings account and are sorted by Star Rating (highest to lowest), then provider name (alphabetically). For more information and to confirm whether a particular product will be suitable for you, check upfront with your provider and read the Product Disclosure Statement or other terms and conditions before making a decision.

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