Downturn might not be as severe as expected, says RBA in June meeting
The RBA continues to monitor the current downturn as it unfolds, with Governor Philip Lowe confirming that both fiscal and monetary policy decisions are working as intended.
“Over the past month, infection rates have declined in many countries and there has been some easing of restrictions on activity,” he said.
“If this continues, a recovery in the global economy will get under way, supported by both the large fiscal packages and the significant easing in monetary policies.”
While the economy is tracking better than expected, the RBA still expects a contraction of up to 10% over the June quarter. How soon domestic conditions will recover depends on how quickly Australians can regain confidence in their finances.
Consumer spending fell dramatically as a result of the economic shutdown. The fear now is that even once the virus is contained and restrictions are lifted, the cautiousness that many are exhibiting will persist.
The drop-off in business investment will be another sticking point. In its quarterly outlook released last month, the Board said uncertainty stemming from the pandemic has led many firms to defer or cancel non-essential capital expenditure.
RELATED: RBA Governor warns against cutting off JobKeeper prematurely
As expected, the cash rate was held at the record low of 0.25%. The RBA has repeatedly said that official interest rates will remain at their current levels until inflation is within the 2-3% target range and progress is made towards full employment.
But some prominent voices have called on the RBA to rethink its position. Westpac chief economist Bill Evans recently urged the Board to take interest rates negative to allow mortgage holders and businesses to borrow at even lower costs.
As for the RBA’s bond purchasing program, activity has been dialled back considerably, with the Board purchasing government securities on only one occasion since its last meeting.
“The Bank is prepared to scale-up its bond purchases again and will do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for 3-year AGS,” Lowe said.
“The target will remain in place until progress is being made towards the goals for full employment and inflation.”
The big question now is whether Australia is technically in the midst of a recession. While the economy is expected to shrink over the June quarter, there’s still some uncertainty about the previous one. We’ll have a verdict on Wednesday with the release of the GDP report.
What’s the outlook for home loans?
The current interest rate setting has put mortgage rates at all-time lows. Among providers in our database, the average 2-year fixed home loan rate sits at 2.98% p.a., while the average variable rate is slightly higher at 3.43% p.a.
Cuts from lenders have flowed through continuously since March, with the majority levelled against fixed rate options. Over the last two months, Mozo recorded 578 cases of lenders reducing fixed rates.
At the time of writing, the lowest fixed rate in our database is 2.19% p.a., which is offered by a number of lenders, including Well Home Loans (2.44% p.a. comparison rate*), Reduce Home Loans (2.54% p.a. comparison rate*), and ING (3.79% p.a. comparison rate*).
What about savings accounts?
Among providers we track, 87 have lowered their at-call savings rates since March, leaving the market average at a paltry 0.74% p.a. 86 400, Bank of Queensland and Up Bank currently offer the joint highest ongoing bonus rate at 1.85% p.a. — 1.11% higher than average.
If we consider just the big banks, the average savings rate sits at just 0.36% p.a. Out of the four, Westpac offers the highest ongoing rate at 1.05% p.a., available so long as account holders make at least one deposit per month and have a higher balance than at the beginning of the month.
For those who don’t mind parting with their savings for an extended period of time, term deposits are a good way to hedge against further interest rate cuts.
Judo Bank currently offers rates between 1.65% p.a. and 2.15% p.a. on 1 year to 5 terms. For those after short-term investment options, Qudos Bank’s rates go as high as 1.80% p.a. on 3 to 12 month terms.
For more information, visit our home loan, savings account and term deposit comparison pages. And if you’re after tips to keep your finances in good health amid the current crisis, browse our coronavirus financial guide.
Read last month's Reserve Bank interest rates update.
Top home loans - last updated 4 May 2024
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Featured Product
Mozo experts choice awards won:
- Low Cost Home Loan - 2024
Unloan Variable
Owner Occupier, LVR <80%
interest rate
comparison rate
Initial monthly repayment5.99% p.a. variable5.90% p.a.Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.
CompareCompareUnloan Variable
Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.
- interest rate
- 5.99% p.a. variable
- comparison rate
- 5.90% p.a.
- interest rate
- 5.99% p.a. variable
- comparison rate
- 5.90% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $10,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Unloan Variable
-
Basic Home Loan
Fixed, Owner Occupier, Principal & Interest, LVR<70%
interest rate
comparison rate
Initial monthly repayment5.99% p.a.
fixed 3 years6.12% p.a.No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.
CompareCompareBasic Home Loan
No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.
- interest rate
- 5.99% p.a.
fixed 3 years
- comparison rate
- 6.12% p.a.
- interest rate
- 5.99% p.a.
fixed 3 years
- comparison rate
- 6.12% p.a.
- Upfront fees
- $350
- Ongoing fees
- $0.00
- Discharge Fee
- $400.00
- Extra repayments
- yes - up to $10,000 p.a.
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 70.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Basic Home Loan
-
Discounted Home Value Loan
Owner Occupier, Principal & Interest, LVR 70-80%
interest rate
comparison rate
Initial monthly repayment6.09% p.a. variable6.09% p.a.Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Settlement fee waived on new borrowings from $50,000 (T&Cs apply).
CompareCompareDiscounted Home Value Loan
Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Settlement fee waived on new borrowings from $50,000 (T&Cs apply).
- interest rate
- 6.09% p.a. variable
- comparison rate
- 6.09% p.a.
- interest rate
- 6.09% p.a. variable
- comparison rate
- 6.09% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $300.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $50,000
- maximum borrowing amount
- $15,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Discounted Home Value Loan
-
Featured Product
Mozo experts choice awards won:
- Low Cost Home Loan - 2024
Unloan Variable
Investment, LVR <80%
interest rate
comparison rate
Initial monthly repayment6.29% p.a. variable6.20% p.a.Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for investors. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.
CompareCompareUnloan Variable
Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for investors. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.
- interest rate
- 6.29% p.a. variable
- comparison rate
- 6.20% p.a.
- interest rate
- 6.29% p.a. variable
- comparison rate
- 6.20% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $10,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Unloan Variable
-
Flex Home Loan
Fixed, Owner Occupier, Principal & Interest, LVR 60-70%
interest rate
comparison rate
Initial monthly repayment5.99% p.a.
fixed 3 years6.41% p.a.Competitive fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 20% deposit required.
CompareCompareFlex Home Loan
Competitive fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 20% deposit required.
- interest rate
- 5.99% p.a.
fixed 3 years
- comparison rate
- 6.41% p.a.
- interest rate
- 5.99% p.a.
fixed 3 years
- comparison rate
- 6.41% p.a.
- Upfront fees
- $250
- Ongoing fees
- $250.00 yearly
- Discharge Fee
- $300.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 70.00%
- minimum borrowing amount
- -
- maximum borrowing amount
- -
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Flex Home Loan
Your selected reserve bank interest rates
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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
^See information about the Mozo Experts Choice Home Loan Awards
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.