Current RBA cash rate: 0.35%

The cash rate is Australia's official interest rate which is currently held at a target of 0.35% by the Reserve Bank of Australia (RBA).

The cash rate is determined by the Reserve Bank of Australia in a board meeting every month (excluding January). This rate is the rate charged on loans between financial institutions (like banks), and it has a significant impact on the price of financial products.

In Australia, a high RBA cash rate has historically resulted in high interest rates on home loans, car loans, personal loans, savings accountsterm deposits and so on. Likewise, a low cash rate results in low interest rates on these products, which is good for borrowers but not for savers.

As things stand, Australia's current cash rate is 0.35%. The infographic below displays the recent history of Australia's cash rate, which you can also find on the RBA's website.

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Current home loan interest rates

Home loan rates are closely tied to the cash rate - the lower the cash rate, the lower home loan rates will go as lenders fight and scrape to offer the most competitive rates on the market.

Getting a low home loan interest rate is extremely important. Homes cost hundreds of thousands of dollars, which is likely to be the biggest expense of your life by far. Even a cheap home loan will still rack up interest costs of over a hundred thousand dollars over the life of the loan, so it's imperative you don't just pick the first home loan you see.

For a variable owner-occupied home loan (P&I), there are home loan rates available below 2.00% p.a, while at the other end of the scale you can get a home loan in excess of 5.00% p.a.

Other home loan products:

The infographic above displays how average home loan interest rates have changed since July 2019.

Compare Home Loans


If you don't want to get stuck with a high-rate home loan, check out a collection of some of the lowest-rate home loans on the market in our table below.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 26, 2022. View disclaimer.


Current savings account interest rates

Savings accounts are typically separate to your everyday bank account, aka a transaction account. When you open a bank account you should have both - the transaction account to make payments with, and the savings account to earn interest.

The interest rate on your savings account can help you earn a little bit extra on the money you've earned. Say you deposit $10,000 worth of savings in an account that pays 2.00% p.a: after one year you'd have earned a little bit more than $200 (thanks to the magic of compound interest).

However, you're unlikely to find a 2.00% p.a interest rate at the moment. Savings account interest rates are at historic lows thanks to the also historically low cash rate. The highest the average customer can get is closer to 1.00% p.a, while the average savings account from the big four banks is below 0.50% p.a. 

Types of savings accounts:

Compare Savings Accounts


To find a good savings account interest rate, check out our table below that shows some of the highest interest rates available.

Lender

4000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

Savings Account (Amounts < $24k)

    4000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

    High Interest Savings Account (< $250k)

      4001$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

      Online Saver ($1-$100k)

        0500$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

        Reward Saver

          000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

          BU Savings Account

            Rates based on a savings balance of $10,000. Sorted by total interest rates. Refer to providers' websites for bonus rate conditions and for any applicable fees and charges. Rates correct as of May 26, 2022. View disclaimer.


            Current term deposit interest rates

            Term deposits are a similar beast to savings accounts except the money is typically locked away for the duration of the term, whereas funds in a savings account should be able to be withdrawn at any time. Also, the interest rate on a term deposit is fixed for the whole term (like a fixed-rate home loan), while a savings account's interest rate could be raised or cut several times a year (like a variable-rate home loan).

            Term deposits are offering similar interest rates to savings accounts at the moment as they too are closely linked to the cash rate. The average deposit rate from the big four banks is currently just 0.30% p.a.

            Looking across the broader market, the average rate for term deposits across the market is  less than 0.50% p.a. The average rates for the different term deposit terms can be seen in the infographic below, with longer terms generally attracting higher interest rates.

            Different deposit terms:

            Compare Term Deposits


            There are term deposit rates on the market higher than these averages though, and you should endeavor to find one. The table below displays some of the highest term deposit rates available for a six-month term.

            Lender

            Annually$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]100031$product[$field["value"]]$product[$field["value"]]More details

            Personal Term Deposit - 6 months (Annually)

              At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]5000$product[$field["value"]]$product[$field["value"]]More details

              Term Deposit - 6 months

                At Maturity, Annually$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]1000031$product[$field["value"]]$product[$field["value"]]More details

                Term Deposit - 6 months ($10k-$250k)

                  Annually, At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]100031$product[$field["value"]]$product[$field["value"]]More details

                  Edvest Term Deposit I20 ($1000-$499999) - 6 months

                    Annually, At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]100031$product[$field["value"]]$product[$field["value"]]More details

                    Term Deposit I10 ($1000-$499999) - 6 months

                      Annually, At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]250000$product[$field["value"]]$product[$field["value"]]More details

                      Term Deposit ($250k+) - 6 Months

                        Annually, At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]100031$product[$field["value"]]$product[$field["value"]]More details

                        Term Deposit (> $1000) - 6 months

                          Annually, At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]1000031$product[$field["value"]]$product[$field["value"]]More details
                          FLEXIBLE INTEREST AND REPAYMENT TERMS
                          • Interest can be paid to other institution
                          • Automatic maturity rollover
                          • Early Withdrawal Available
                          FLEXIBLE INTEREST AND REPAYMENT TERMS

                          Term Deposit (<$1m) - 6 months

                          • Interest can be paid to other institution
                          • Automatic maturity rollover
                          • Early Withdrawal Available

                          Rates based on a $50,000 deposit for 6 months. Rates correct as of May 26, 2022. View disclaimer.


                          Why do interest rates change?

                          An interest rate essentially reflects the cost of borrowing money. The lender charges interest as insurance for the possibility of a borrower not being able to pay back the money, as compensation. It helps keep the economy moving by encouraging lending, and spending money.

                          The reason why they may increase or decrease is the result of this supply and demand of credit. An increase in the demand for money or credit will raise interest rates, while a decrease in the demand for credit will decrease them. On the flip side, an increase in the supply of credit will reduce interest rates while a decrease in the supply of credit will increase them.

                          Lenders adjust interest rates on loans for a variety of factors, but a lot of it comes down to the lender’s costs of funding the loan.

                          There are wider markets from which lenders source the funds that allow them to provide a loan, including bond markets and overnight loans between banks, which are influenced by various economic and market forces. When the costs of sourcing these funds goes up (e.g. bond rates rise), the lenders often pass these costs on to customers by raising the interest rates on the loans they provide.

                          Central banks - such as Australia’s RBA - have a big influence on this cost of funding by setting a cash rate, which is essentially the rate on the overnight loans between banks. The RBA sets this cash rate based on whether it thinks the economy needs stimulating (e.g. cuts interest rates to encourage spending and boost economic growth and employment) or needs slowing down (e.g. hikes interest rates to curb high inflation).

                          When you take out a variable rate loan, you are taking the risk of riding these highs and lows.

                          RBA & Cash Rate Frequently Asked Questions

                          The cash rate is an interest rate set by a central bank, determining the rate of interest paid on overnight loans between banks. Generally, banks borrow and process transfers between each other overnight which are the funds lended to meet their daily cash needs.

                          The cash rate also serves as a benchmark rate for everything from mortgages and savings accounts to the exchange rate, making it an important tool for managing national monetary policy.

                          On the first Tuesday of every month aside from January, the RBA meets and announces its decision on whether to alter the cash rate or keep it steady. To determine the cash rate, the RBA considers a number of key economic factors including inflation, employment, the economic growth rate of the Australian economy and global financial conditions.

                          Inflation

                          Typically referred to as the Cost Price Index (CPI), inflation is measured quarterly and refers to the increase in the price of items from one point in time to another. The RBA has a flexible annual inflation goal of 2-3%, meaning that while inflation is allowed to fall outside this range, it should remain within 2% and 3% on average. Currently inflation sits at 5.1% annually based on March quarter results and annual trimmed mean inflation (which excludes some bigger short-term price swings that may skew the general trend) sits at 3.7%, well above the target range.

                          Employment

                          Employment and unemployment levels provide an indication as to how well an economy is performing. If unemployment is on the rise, the RBA might choose to lower interest rates to stimulate spending, investment, and the creation of new jobs. If unemployment is low, the RBA may choose not to raise the cash rate if wage growth is also low. Current unemployment levels sit at 4.0%, the lowest since 1974.

                          Economic growth

                          Economic growth in Australia is typically measured as a percentage change in the nation’s total value of goods and services or Gross Domestic Product (GDP). If economic growth has slowed or is on the way down, the RBA may lower the cash rate to bring demand for goods and services back up. This works by reducing the incentive to save and increasing the incentive to borrow and spend.

                          Global financial conditions

                          Global financial conditions also feature in determining the cash rate. Strong economic growth overseas can mean increased demand for Australian products. On the other hand, if overseas conditions are weak or if tensions exist among major trade partners, the flow-on effect could hit Australia’s economy. 

                          In Australia, the RBA controls the cash rate. Financial institutions are free to set their own interest rates, but they generally follow the cash rate’s movements.

                          If the RBA lowers the cash rate, banks are also likely to follow suit, reducing their loan rates and rates for savings accounts and term deposits. This means it may be easier to obtain a loan, with mortgage rates becoming more favourable for buyers. However, lower cash rates may also mean that you receive significantly lower returns on your savings, as interest payments decline in value.

                          If the RBA increases the cash rate, borrowing generally becomes more expensive, but savers may be able to earn more interest on their savings accounts and term deposits.

                          Where the cash rate flows through to other interest rates is often referred to as ‘interest rate pass-through’. While the RBA’s monthly cash rate announcements are important and do partly influence how banks and lenders set their interest rates, they are not the only factor that goes into the decision. Other factors such as conditions in financial markets, changes in competition, and risks associated with different types of loans also influence interest rates. As a result, the degree of interest rate pass-through can vary over time.

                          The cash rate can have a big influence over home loan interest rates, although banks and lenders are under no obligation to follow the decisions of the RBA. However, for most lending institutions, the cash rate forms a central part in determining their own interest rates. When the cash rate is low, lenders may be expected to offer lower interest rates to new and first home-buyers and refinancers in the housing market. A rise in the cash rate, however, could likewise mean home loan rates going up, as banks and lenders pass on the cost of the rise.

                          Generally, savings accounts and term deposits can move in line with the cash rate. This means that if the cash rate goes up, banks may raise the interest rates on deposits, which encourages people to deposit their money in savings to earn interest.

                          If the cash rate falls, interest rates on deposits tend to go down with it. This is all too familiar for Australian savings accounts, with interest rates continuing to remain at record lows.

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