Australia’s interest rates have been left on hold at the record-low level of 0.25 per cent as the nation’s economy begins to awaken following blunt coronavirus restrictions.
The Reserve Bank of Australia (RBA) decided to keep the official cash rate on hold for the month of June as improving consumer sentiment and inflation levels prompted less central bank intervention.
RBA Governor Philip Lowe said several factors around COVID-19 urged the nation’s top economists to keep their hand steady.
“The Australian economy is going through a very difficult period and is experiencing the biggest economic contraction since the 1930s,” wrote Mr Lowe in his monetary statement.
“In April, total hours worked declined by an unprecedented 9 per cent and more than 600,000 people lost their jobs, with many more people working zero hours.
“Household spending weakened very considerably and investment plans are being deferred or cancelled.”
Despite the hold in rates, RateCity.com.au research director Sally Tindall said consumers are likely to be better off as banks battle over a smaller market of prospective buyers.
“The big four banks have probably exhausted their capacity to cut fixed rates. Now what we’re seeing is challenger banks trying to outbid them to attract new customers,” said Ms tindall.
“As a result, rates could fall a fraction further, but they’re unlikely to fall far.
“While the majority of new customer rate changes over the past month were cuts, three-year fixed rates have been the exception, with almost the same number of hikes as cuts.”
Ms Tindall said the big four banks were trending customers towards choosing fixed rate mortgages, which are not suitable for everybody.
“The big four banks are offering fixed rates that are, in some cases, over half a percent lower than their lowest variable rates, so it’s no surprise people are gravitate towards fixing,” said Ms Tindall.
“But fixing isn’t for everyone. People need think carefully before they fix because it does come with its own unique set of rules.
“Fixed rate loans typically have caps on extra repayments, limited or no access to an offset account and break fees if they want to get out early.”
Lowest advertised rates from the ‘Big Four’ banks
|
Lender |
Advertised variable |
Advertised 2-yr fixed |
Advertised 3-yr fixed |
|
CBA |
2.79% |
2.29% |
2.29% |
|
Westpac |
2.93% |
2.19% |
2.19% |
|
NAB |
2.84% |
2.29% |
2.29% |
|
ANZ |
2.72% |
2.29% |
2.29% |
