Australia's central bank has held the cash rate at 0.25% for July.
The announcement comes as little surprise, with recent comments from the Reserve Bank of Australia (RBA) suggesting it would be some time before the rate was changed.
The central bank has indicated it has no appetite for negative interest rates and there would be no hike in the rate until progress towards full employment was made.
Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.
Smart Booster Home Loan
- Discount variable for 1 year <=80% LVR
- No ongoing fees
- Unlimited redraw facility
Monthly repayments: $1,476
- Discount variable for 1 year
- No ongoing fees
- Unlimited redraw facility
Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
RBA Governor Phillip Lowe said the Australian economy was experiencing its worst contraction since the Great Depression but there were signs of improvement.
"Conditions have, however, stabilised recently and the downturn has been less severe than earlier expected," Dr Lowe said.
"While total hours worked in Australia continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely.
"There has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions in most of the country."
Despite this, Dr Lowe said fiscal and monetary support would be required for some time, as a return to normality was some way off.
"Notwithstanding the signs of a gradual improvement, the nature and speed of the economic recovery remains highly uncertain," he said.
"Uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans.
"The pandemic is also prompting many firms to reconsider their business models. As some businesses rehire workers as demand returns, others are restructuring their operations."
No surprises from the RBA
Mortgage Choice Chief Executive Officer Susan Mitchell said the RBA's decision came as little surprise, with the low cash rate supporting a low cost of borrowing, which in turn supported activity in the home loan market.
"Lenders have been pulling out all stops to compete for market share and over the last few months, we have seen cashback offers and interest rates lowered across both variable and fixed-rate home loan products, Ms Mitchell said.
"This fierce competition has encouraged a vast number of borrowers to switch their home loan providers and refinance their loans."
Ms Mitchell said the economic climate and abundance of extremely low rates had a huge number of borrowers fixing their home loan.
"Mortgage Choice data shows that 33% of borrowers opted to fix either part or all of their home loan interest rate in the month of June, up from the three month average of 14% to February 2020."
September remains a concern
CreditorWatch chief executive Patrick Coghlan said despite the gradual improvement in economic conditions, the Government and the RBA needed to support the small and medium-sized business sector.
"While positive sentiment has increased in recent weeks as the economy and trade starts to open up, the big concern is what happens in and around September when the stimulus packages potentially come to an end – namely, Jobkeeper, Jobseeker, rental abatement, a home loan repayment reprieve, insolvency/bankruptcy legislation and safe harbour changes, Mr Coghlan said.
"There’ll be a serious shock to the economy as people are once again forced to start paying the bills and/or stop receiving government incentives."
He said business owners would need to start looking at whether they can survive and company directors needed to act diligently to not rack up debt they couldn't repay.
"Currently, there are plenty of businesses out there that should be initiating wind up or at least engaging with a restructuring specialist or banker," he said.
Ms Mitchell meanwhile said all eyes would be on the government to see if they would extend JobKeeper and JobSeeker past their September end date.
“Unless we see a dramatic change in economic indicators, we can expect to see the Reserve Bank’s policy setting to remain in place for a long time," she said.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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