With the cash rate on hold, where can consumers find the top interest rates?

The Reserve Bank of Australia (RBA) has announced it will leave the official cash rate at a record low of 0.25% for October. So, how could this decision impact your home loan, savings and term deposit interest rates and what are some of the best available rates for consumers at the moment? Canstar investigates.

Today’s decision from the RBA to hold the cash rate was widely anticipated by many economists, who believed the central bank would take the opportunity to assess the Federal Budget, announced later today, before moving on monetary policy.

RBA Governor Philip Lowe said in a statement accompanying the announcement that while the global economy is “gradually recovering” from the impacts of the COVID-19 pandemic, the recovery is likely to be “bumpy and uneven”, and it will take some time before the level of output (GDP) in Australia returns to its 2019 level.

“Both fiscal and monetary support will be required for some time given the outlook for the economy and the prospect of high unemployment,” Dr Lowe said.

Dr Lowe said the RBA Board would not increase the cash rate until progress is made towards lowering the rate of unemployment and inflation is “sustainably within” the 2%-3% range.

“The Board continues to consider how additional monetary easing could support jobs as the economy opens up further,” he said.

October marks the seventh consecutive month the RBA has decided to hold the cash rate, after previously making two rate cuts in March and announcing a quantitative easing program to help stimulate the economy during the fallout from the COVID-19 pandemic.

↓ Keep reading to discover where to find the top interest rates on Canstar’s database for home owners and savers

Banks typically use the official cash rate as a guide for setting interest rates on their products, including home loans and savings accounts.

Usually when the cash rate is low, like it is currently, the interest rates on mortgages and savings accounts will also be lower as a result. This is good news for those with a home loan, but not so great for those trying to grow their money through a savings account or term deposit.

Top home loan interest rates on Canstar’s database

The current cash rate of 0.25% has translated into some of the lowest fixed and variable home loan interest rates on record, according to Canstar Research.

Canstar’s finance expert Steve Mickenbecker said lenders are continuing to provide encouragement to new borrowers and relief for refinancers, with 22 home loan providers cutting variable rates for new lending in September. Variable rates were cut by an average of 0.24 percentage points, while a total of 11 lenders made fixed rate reductions during the month, by an average of 0.21 percentage points.

Top variable rates for owner-occupiers paying principal & interest

1. 1.99%, reverts to 2.48% (comparison rate 2.47%) – loans.com.au’s Smart Booster Home Loan Intro 1 year
2. 1.99%, reverts to 2.50% (comparison rate 2.93%) – Illawarra Credit Union’s The Works Package Home Loan P&I 2 year Intro
3. 1.99%, reverts to 2.99% (comparison rate 3.25%) – Community First Credit Union’s Accelerator Package Home Loan P&I Intro
4. 2.19% (comparison rate 2.26%) – Reduce Home Loans Super Saver Variable
5. 2.19%, reverts to 2.59% (comparison rate 2.58%) – Firstmac’s Basic 80 P&I 2 year

Source: www.canstar.com.au – 6/10/2020. Based on owner-occupier variable loans on Canstar’s database available for a loan amount of $400,000 at 80% LVR with principal & interest repayments, excluding first home buyer-only loans. Top 5 selected and list sorted in descending order by rate, followed by comparison rate. Comparison rates calculated based on a $150,000 loan amount over a total loan term of 25 years.

Top fixed rates (of any term) for owner-occupiers paying principal & interest

1. 1.90% (comparison rate 2.42%) – Reduce Home Loans’ Rate Crusher 1 year Fixed
2. 1.98% (comparison rate 2.38%) – Homestar Finance’s Star Classic Owner Occupied P&I Fixed 1 year Special Offer
3. 1.99% (comparison rate 2.37%) – Pacific Mortgage Group’s Residential Fixed P&I 1 year
4. 1.99% (comparison rate 3.10%) – Bank First’s Premier Package Home Loan O/O P&I Fixed 3 years <80%
5. 1.99% (comparison rate 3.25%) – Community First Credit Union’s Accelerator Package Fixed P&I 2 years Special Offer

Source: www.canstar.com.au – 6/10/2020. Based on owner-occupier fixed loans on Canstar’s database available for a loan amount of $400,000 at 80% LVR with principal & interest repayments, excluding first home buyer-only loans. Top 5 selected and list sorted in descending order by rate, followed by comparison rate. Comparison rates calculated based on a $150,000 loan amount over a total loan term of 25 years.

Top interest rates for savers on Canstar’s database

When it comes to savings account interest rates, Canstar data shows 37 providers have cut the interest earnings in September, with regular savings accounts cut by an average of 0.15 percentage points, while bonus savers were reduced by an average of 0.11 percentage points.

Mr Mickenbecker said with the Reserve Bank’s monetary settings driving down the cost of alternative bank funding, savers are being offered lower interest rates and “further cash rate cuts could only inflict more pain”.

Top online savings account rates

1. 2.00% – Rabobank Australia’s High Interest Savings Account (0.55% base rate + 1.45% promotional rate for four months)
2. 1.90% – Heritage Bank’s Online Saver (0.80% base rate + 1.10% promotional rate for four months)
3. 1.60% – Bank of China’s Online Saver (o.60% base rate + 1.00% promotional rate for four months)
4. 1.60% – UBank’s USave Savings Bonus (0.54% base rate + 1.06% conditional bonus rate)
5. 1.60% – 86 400’s Save Account (0.15% base rate + 1.45% conditional bonus rate)
6. 1.60% – Up’s Up Savers (0.10% base rate + 1.50% conditional bonus rate)

Source: www.canstar.com.au – 6/10/2020. Based on savings accounts on Canstar’s database available with a deposit amount of $10,000. Products selected and list sorted in descending order by total rate, followed by base rate. Total rate includes base rate plus any applicable promotional bonus and/or conditional bonus rate. Conditions apply to promotional and conditional rates, contact the relevant company for full terms and conditions.

Top term deposit rates (of any term)

1. 1.55% – Judo Bank’s Personal Term Deposit 3 years (paid at end of term)
2. 1.25% – BankVic’s Term Deposit (I20) 9 months (paid at end of term)
3. 1.25% – Greater Bank’s Term Deposit 5 years (paid at end of term)
4. 1.15% – Newcastle Permanent’s Term Deposit 5 years (paid annually)
5. 1.10% – Australian Unity’s Term Deposit 3 months (paid at end of term)
6. 1.10% – Teachers Mutual Bank’s Term Deposit 12 months (paid monthly or at end of term)
7. 1.10% – MOVE Bank’s Fixed Term Deposit 15 months (paid annually)
8. 1.10% – The Mutual Bank’s Term Deposit 3 years (paid annually)

Source: www.canstar.com.au – 06/10/2020. Based on the top rates for non-compounding term deposits on Canstar’s database available on a deposit of $10,000. One product per provider is displayed. If the top rate is available across multiple terms, the shortest term is displayed. Products selected and list sorted in descending order by interest rate, followed by ascending order by term.

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

Follow Canstar on Facebook and X for regular financial updates.