RBA holds cash rate for June: What are the top interest rates for Australian consumers?

The Reserve Bank of Australia (RBA) has announced it will leave the official cash rate at a record low of 0.25% for June. So, what does this mean when it comes to interest rates for borrowers and savers? Let’s take a look at some of the top rates on our database for those searching for a better deal.
RBA cash rate interest rates
The Reserve Bank of Australia has left the cash rate on hold at 0.25% in June 2020. Image source: BsWei (Shutterstock)

Today’s decision from the RBA to hold the cash rate for a third month in a row has come as no surprise to many economists, including Westpac’s Bill Evans, who recently predicted the cash rate to remain at 0.25% for at least another three years.

RBA Governor Philip Lowe said in a statement today that an increase to the cash rate was off the table until progress is made towards reaching “full employment” and an inflation target of 2-3%.

“The Board is committed to do what it can to support jobs, incomes and businesses and to make sure that Australia is well placed for the recovery. Its actions are keeping funding costs low and supporting the supply of credit to households and businesses,” Dr Lowe said.

Dr Lowe also touched on how the unprecedented easing of fiscal and monetary policy has helped the Australian economy through the coronavirus pandemic.

“It is likely that this fiscal and monetary support will be required for some time,” he said.

Although the cash rate is expected to remain unchanged for some time, there are still good deals to be had when it comes to home loan, savings account and term deposit interest rates for Australian consumers willing to research their options.

June interest rate wrap

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

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.

While borrowers may reap the potential benefits of these low rates, savers and retirees who rely on interest from their bank deposits have been dealt a blow, with many financial institutions regularly cutting the interest rates on their savings accounts and term deposits in recent times.

“Rates just keep going lower, so depositors have to work their money hard and seek out a good interest rate, not just necessarily stay where they’ve always been,” Canstar finance expert Steve Mickenbecker said.

Home loan rates in June

In May, Canstar’s home loan database recorded 36 cuts to variable interest rates for homeowners and investors, with an average fall of 0.08 percentage points. At the time of writing, the lowest standard variable rate for homeowners paying principal and interest repayments on Canstar’s database stands at 2.39%.

However, the vast majority of rate reductions on Canstar’s database last month were to fixed products. According to Canstar Research, there were a total of 220 interest rate decreases made across all owner-occupier and investor fixed rate products, by an average reduction of 0.36 percentage points.

HSBC recently joined a string of lenders making cuts on their fixed rate home loans. The bank announced yesterday that it would be reducing its two-year fixed rate to 2.09% (comparison rate 3.10%) for owner-occupiers paying principal and interest. This cut from HSBC sees the lender’s two-year fixed rate fall in line with that of ING (comparison rate 3.77%), with both banks now offering the lowest interest rate of all home loan products on Canstar’s database.

So, why are so many lenders making cuts on their fixed rate products right now?

Mr Mickenbecker said the RBA has put in place considerable support to help secure longer-term funding for lenders during the coronavirus outbreak, which in turn has set up an environment where lenders are able to offer more attractive two, three and five-year fixed rate home loans for customers.

“Cutting fixed rates has really become the competitive instrument lenders are using to stay appealing in the market right now, as well as to push borrowers to refinance,” he said.

With a difference of 1.38% between the average variable rate and the lowest two-year fixed rate on Canstar’s database, Mr Mickenbecker said refinancing to a fixed rate may be looking like an increasingly appealing option for borrowers wanting to make big savings on their home loan.

“But if you are fixing, you have to consider that you will lose some flexibility and you may not be able to pay your home loan off earlier,” he said.

Top 3-year fixed rate home loans for owner-occupiers paying principal & interest

  1. 2.14% (comparison rate 3.62%) – ING’s Orange Advantage Residential Fixed 3 yrs 150k+
  2. 2.19% (comparison rate 2.39%) – Pacific Mortgage Group’s Residential Fixed P&I 3 yrs
  3. 2.19% (comparison rate 2.54%) – Reduce Home Loans’ Home Owners Dream 3 yrs Fixed 90%
  4. 2.19% (comparison rate 3.85%) – Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank and Unibank’s Standard Fixed Rate 3 yrs
  5. 2.21% (comparison rate 2.67%) – Aussie’s Select Basic Fixed P&I 3 yrs 80%

Source: www.canstar.com.au – 1 June 2020. Based on three-year fixed owner-occupier home loans on Canstar’s database for a loan amount of $400,000, 80% LVR and principal & interest repayments; excluding introductory, special condition and first home buyer-only loans. Comparison rates calculated based on a $150,000 loan repaid over 25 years. List sorted in ascending order by interest rate, followed by comparison rate, followed alphabetically by lender.

The comparison tables below display some of the fixed rate home loan products on Canstar’s database with links to lenders’ websites, for refinancing owner-occupiers in NSW making principal and interest repayments on a loan of $350,000 with an 80% LVR. Choose between the 1-year fixed, 3-year fixed and 5-year fixed tabs to view results most relevant to you. The results are sorted by ‘current rate’ (lowest to highest), then by company name (alphabetically). 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 1-year fixed home loans

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

Lowest interest rates for 3-year fixed home loans

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

Lowest interest rates for 5-year fixed home loans

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

Top variable rate home loans for owner-occupiers paying principal & interest

  1. 2.39% (comparison rate 2.39%) – Reduce Home Loans’ Rate Slasher <80%
  2. 2.39% (comparison rate 2.39%) – Homestar Finance’s Star Essentials 80% OO 150-850k
  3. 2.39% (comparison rate 2.40%) – TicToc Home Loans’ Live-in Variable P&I
  4. 2.44% (comparison rate 2.44%) – Pacific Mortgage Group’s Variable P&I
  5. 2.49% (comparison rate 2.49%) – Freedom Lend’s Freedom Variable P&I 80%

Source: www.canstar.com.au – 1 June 2020. Based on variable owner-occupier home loans on Canstar’s database for a loan amount of $400,000, 80% LVR and principal & interest repayments; excluding introductory and first home buyer only loans. Comparison rate calculated based on a loan amount of $150,000 repaid over 25 years.  List sorted in ascending order by rate, followed by comparison rate, followed alphabetically by lender.

Savings accounts and term deposit rates in June

In May, Canstar’s savings account database recorded 12 cuts to base savings rates and 15 to bonus savings rates, with average falls of 0.11 percentage points and 0.16 percentage points, respectively. These calculations factored in accounts paying a base rate of at least 0.05% per annum on a deposit of $10,000.

There were also falls in term deposit rates across the board on Canstar’s database, with average rate decreases ranging from 0.13 to 0.26 percentage points.

Mr Mickenbecker said that while interest rates on all savings products have been declining for some time now, there are still some reasonable rates to be had for those that do their research.

“For example, consumers could currently earn up to a maximum of 1.80% in a one-year or six-month term deposit, but that means they would need to be prepared to lock their money away for that period of time,” he said.

According to Mr Mickenbecker, consumers can also access online savings rates of up to 2.26% if they are willing to move their money around different accounts every three to four months to chase attractive introductory offers.

“However, if you don’t move your money out of an account after an introductory bonus period runs out, you could be left with a less than appealing rate, some as low as 0.05%,” he said.

Mr Mickenbecker said bonus savings accounts may also offer considerable value for some savers, but in order to get the base rate plus the bonus rate on these accounts, consumers must make sure they can meet their bank’s bonus conditions each month, such as making a certain number of deposits or withdrawals.

“With rates so low right now, it really calls for people to work harder to find different savings vehicles that will suit their needs in order to grow a reasonable return,” he said.

Top online savings account rates

  1. 2.26% – AMP Bank’s Saver Account (1.05% base interest rate and 1.21% six-month promotional bonus rate)
  2. 2.26% – Macquarie Bank’s Savings Account (1.35% base interest rate and 0.91% four-month promotional bonus rate)
  3. 2.25% – Rabobank Australia’s High Interest Savings Account (0.80% base interest rate and 1.45% four-month promotional bonus rate)
  4. 2.20% – Heritage Bank’s Online Saver (0.80% base interest rate and 1.40% four-month promotional bonus rate)
  5. 2.05% – Citi’s Online Saver (0.35% base interest rate and 1.70% four-month promotional bonus rate)

Source: www.canstar.com.au – 1 June 2020. Based on flexible savings accounts on Canstar’s database with a deposit amount of $10,000. Flexible savings accounts include those with no conditional bonus interest rate. Products listed in descending order by total rate, followed by base rate, followed alphabetically by provider. Total rate includes base rate plus any applicable promotional bonus. Conditions may apply to promotional rates, contact the relevant company for full terms and conditions.

Top 6-month term deposit rates

  1. 1.80% – Qudos Bank’s Term Deposit
  2. 1.75% – Judo Bank’s Personal Term Deposit
  3. 1.65% – QBANK’s Term Deposit
  4. 1.60% – Arab Bank Australia’s Term Deposit
  5. 1.60% – Australian Military Bank’s Investment Plus
  6. 1.60% – Bank of Sydney’s Online Term Deposit
  7. 1.60% – Citi’s Term Deposit
  8. 1.60% – ME’s Term Deposit

Source: www.canstar.com.au – 1 June 2020. Based on personal, non-compounding term deposits available for a deposit amount of $10,000 and a total term of six months, with interest paid at the end of the deposit term. List sorted in descending order by rate, followed alphabetically by provider.

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