- Fixed home loan rates and term deposit rates largely headed higher this week
- This follows the RBA holding the cash rate on Tuesday but signalling it would increase the rate if inflation remained too high
- It seems retail interest rates may be positioning for another possible rate increase
It was only two weeks ago that two big banks - ANZ and Macquarie - made the bold move of cutting fixed home loan rates, indicating some confidence the cash rate's next move would be down.
On Tuesday, the Reserve Bank of Australia (RBA) elected to hold the cash rate at 4.35%, halting the upward march of three consecutive rate increases to kick off 2026.
While the hold was widely expected, RBA governor Michele Bullock made sure markets didn't get too far ahead of themselves, reiterating inflation was "still too high" and that the board would increase the cash rate further if it was required.
The hawkish tone of the RBA's post-meeting statement and Ms Bullock's media conference may have had some bearing on this week's movements in both home loan and term deposit interest rates.
Movements across both market segments were largely higher although not too many banks were showing their hands this week.
More fixed home loan rates up
Fixed home loan rates are a good indication of where lenders think rates will be in the future.
This week, the merged Bank Australia and Qudos Bank wagered they might be a little higher.
Both brands increased their fixed home loan rates by 10 basis points across the board.
The lowest rate for owner occupiers is now 6.34% p.a. (6.16% p.a. comparison rate*) fixed for one year for loan-to-value ratios (LVRs) 80% or less for borrowers making principal & interest (P&I) repayments.
Meantime, Community First Bank had a bet each way, raising its Go Basic variable-rate home loan with P&I repayments and less than 80% LVR by one basis point to 5.95% p.a. (6.00% p.a. comparison rate*).
At the same time, it dropped the rate for LVRs above 80% by four basis points to 6.25% p.a. (6.30% p.a. comparison rate*).
Banks try to revive dead investor market
The regional Hume Bank was another bank lowering rates with week, slashing a sweeping range of its fixed home loan rates, with investor rates seeing the biggest cuts.
New investor home loans have plummeted across the market since the housing tax changes announced in the May federal budget.
Hume's biggest rate cut was 60 basis points on a three-year fixed investment loan for LVRs between 80-90%.
Earlier in the week, BankVic also launched its bid to attract new investment lending.
Not only will eligible new investors or refinancers get $3,000 cash back, they will also have their $600 loan establishment fee waived.
Safe to say, it may take more than that to get investors to dip their toes into a market stripped of ongoing negative gearing tax benefits and changed capital gains tax rules.
See also:
- RBA hits pause, but housing slowdown still gaining speed
- Mortgage demand collapses as housing market stalls
Term deposit rates also on the up
There were several banks moving on term deposit rates this week, with most heading higher.
Here's a rundown:
- Heartland Bank nudged its nine- and 12-month rates higher to 5.50% p.a. and 5.55% p.a. respectively, putting those rates among the market leaders.
- ANZ-owned Suncorp Bank varied its shorter-term rates, upping its four-month rates by as much as 25 basis points and dropping its six-month rates by 15 basis points.
- Unity Bank boosted its two-year rates by 20 basis points to 5.55% p.a. for interest paid annually and 5.40% p.a. for monthly interest payments. The minimum deposit amount is $1,000.
So, where is the cash rate headed?
The direction may be a little clearer when the May monthly inflation data is released on Wednesday.
It will be followed the next day by more key data, Australian jobs figures.
The RBA's mandate is to balance its fight against inflation with the interests of full employment in making its cash rate decisions.
Another development this week is the peace deal between the US and Iran which may lead to fuel prices easing, but likely not right away.
The federal government has been cushioning price pain by cutting its excise tax on fuel, an arrangement that is due to end on 30 June.
Before the truce, the government hadn't ruled out extending the tax cut but may wait to see how the promised reopening of the Strait of Hormuz plays out.
Ending the tax break before oil is flowing again will likely spike fuel prices and, in turn, stoke inflationary pressures in the economy.
Over to the the experts
While economists widely agreed the cash rate would remain unchanged after the RBA's June meeting, the outcome for August is less clear cut.
The most hawkish of the big four bank economists, Westpac, is sticking with its forecast of a 25-basis point rise in August although has wound back its prediction of a swift follow-up hike in September.
Westpac economists now believe the RBA's monetary policy board may pause for longer after August but keep another hike in the back pocket depending on the next few inflation prints.
The other big three are sticking with their outlooks of no more rate increases for 2026 with the next move likely to be a decrease sometime in 2027, generally towards the second half of the year.
Markets are currently pricing in a 28% chance of an August cash rate increase after the certainty of their 0% chance of a June increase.
Next week's inflation and jobs data may provide some clues.
Advertisement
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
