RBA holds cash rate in May: What are the top interest rates for Australian households?

While the official cash rate will remain on hold at the historic low of 0.25% this month, interest rates continue to track lower for consumers. Here are some of the top rates for astute homeowners and savers chasing a better deal.
RBA cash rate decision May 2020
The Reserve Bank of Australia has left the cash rate on hold in May 2020. Image source: Frederic Muller, Shutterstock.

The Reserve Bank of Australia board met today for its usual monthly monetary policy meeting, where it also now considers how it could further support the economy during the financial fallout of the coronavirus pandemic.

The board decided to keep the cash rate at 0.25% – which is what it has effectively dubbed the floor. The RBA had previously said there was “no appetite” for negative interest rates in Australia.

RBA Governor Philip Lowe said in a statement today that an increase to the cash rate was off the table until the targets for employment and inflation were back on track.

“The board is committed to do what it can to support jobs, incomes and businesses during this difficult period and to make sure that Australia is well placed for the expected recovery,” Dr Lowe said.

While the cash rate looks to be set in stone for some time, with economists such as those at Westpac expecting it could be on hold for at least another three years, there are savings available to astute consumers who want a better interest rate on their home loan, savings account or term deposit.

May interest rate wrap

The potential savings opportunities are ripe for property owners with mortgages at the moment, with Canstar’s database showing home loan interest rates have dropped to record lows.

But the interest rate cuts haven’t been so kind to savers, with the numbers showing that consumers stashing their money away in savings accounts and term deposits need to work hard for their money.

Home loan rates in May

In April, Canstar’s home loan database recorded 81 cuts to variable interest rates for homeowners and 71 for investors, with average falls of 0.20 percentage points and 0.21 percentage points on principal and interest loans, respectively.

Canstar finance expert Steve Mickenbecker said borrowers should generally be looking to lower their loan costs, to put more money in their pocket each month or to allow the loan to be paid off faster.

“Financial survival today is getting your home loan repayments down to fit your budget, and tomorrow’s road to recovery is to find a super low interest rate to help pay your loan off early,” Mr Mickenbecker said.

With restrictions in some states starting to lift on open houses and auctions, he said the record low interest rates available might now encourage buyers back into the market.

“Buyers should be bargain hunting for the right loan, not just the right property,” he said.

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

  1. 2.09% (comparison rate 2.64%) – Reduce Home Loans’ Home Owners Dream 3 yrs Fixed 90%
  2. 2.14% (comparison rate 3.62%) – ING’s Orange Advantage Residential Fixed 3 yrs 150k+
  3. 2.14% (comparison rate 3.83%) – Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank and UniBank’s Fixed Rate 3 yr
  4. 2.15% (comparison rate 2.45%) – Pacific Mortgage Group’s Residential Fixed P&I 3 yrs
  5. 2.21% (comparison rate 2.67%) – Aussie’s Select Basic Fixed PI 3 yrs 80%

Source: www.canstar.com.au – 5 May 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 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.

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). 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 2.40%) – Reduce Home Loans’ Rate Slasher
  2. 2.44% (comparison rate 2.47%) – Homestar Finance’s Star Essentials 80% OO 150-850k
  3. 2.49% (comparison rate 2.49%) – Freedom Lend’s Freedom Variable PI 80%
  4. 2.49% (comparison rate 2.49%) – Pacific Mortgage Group’s Variable P&I
  5. 2.54% (comparison rate 2.55%) – TicToc Home Loans’ Live-in Variable P&I

Source: www.canstar.com.au – 5 May 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 by alphabetically by lender.

Compare home loan interest rates

Savings accounts and term deposit rates in May

In April, Canstar’s savings account database recorded 29 cuts to base savings rates and 31 to bonus savings rates, both with average falls of 0.23 percentage points.

Mr Mickenbecker said that with base savings rates at many banks now down to an “emaciated” 0.05%, savers are having to work hard to get a reasonable return.

However, he added there are rates on of up to 2.65% on Canstar’s database if you are willing to move your money around every four months and become a ‘rate chaser’, while consumers who are willing to meet bonus interest conditions every month could earn up to 2% in a bonus savings account.

Term deposit-holders haven’t been immune to low interest rates either. In fact, the National Australia Bank cut its term deposits by between 0.05 and 0.85 percentage points this morning, before the RBA’s cash rate call. But it also increased its one-year term deposit rate by 0.35 percentage points, taking it to 1.35%.

According to Canstar’s term deposit database, consumers could currently earn up to a maximum of 1.95% in a one-year or six-month term deposit.

“When rates are so low, now is not the time to be lazy with your savings,” Mr Mickenbecker said.

Top online savings account rates

  1. 2.65% – Macquarie Bank’s Savings Account (1.35% base interest rate and 1.30% promotional bonus rate)
  2. 2.26% – AMP Bank’s Saver Account (1.05% base interest rate and 1.21% promotional bonus rate)
  3. 2.25% – Rabobank Australia’s High Interest Savings Account (0.80% base interest rate and 1.45% promotional bonus rate)
  4. 2.20% – Heritage Bank’s Online Saver (0.80% base interest rate and 1.40% promotional bonus rate)
  5. 2.05% – Citi’s Online Saver (0.35% base interest rate and 1.70% promotional bonus rate)

Source: www.canstar.com.au – 5 May 2020. Based on flexible savings accounts available 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. 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.

Compare savings account interest rates

Top 6-month term deposit rates

  1. 1.90% – Qudos Bank’s Term Deposit
  2. 1.85% – Judo Bank’s Personal Term Deposit
  3. 1.80% – Arab Bank Australia’s Term Deposit
  4. 1.80% – Citi’s Term Deposit
  5. 1.80% – ME’s Term Deposit

Source: www.canstar.com.au – 5 May 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 by alphabetically by company.

Compare term deposit interest rates

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