RBA keeps cash rate steady at April meeting
The official cash has been left on hold at 4.10% by the Reserve Bank Board at its latest meeting, which concluded this afternoon.
Leading up to the meeting the consensus from experts and the market had been that rates would be held steady. That turned out to be spot on, with the Board failing to deliver any April Fool's Day surprise.
In its post-meeting monetary policy decision statement, the RBA Board noted that while inflation rate is continuing to trend in the right direction, uncertainty still abounds - especially at the international level.
"Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
"Recent information suggests that underlying inflation continues to ease in line with the most recent forecasts published in the February Statement on Monetary Policy.
"Nevertheless, the Board needs to be confident that this progress will continue so that inflation returns to the midpoint of the target band on a sustainable basis. It is therefore cautious about the outlook."
Mortgage rate cuts trickle down
While back-to-back rate cuts would have been welcomed by most Australians with a home loan, many will have started to benefit from cuts passed on by lenders following the RBA's February rate reduction.
The vast majority of lenders have now passed on a 25 basis point cut to borrowers in the weeks following the February rate cut, data from financial comparison website Mozo reveals. Although Virgin Money is one of the notable exceptions.
As a result, the average variable home loan rate for owner-occupier borrowers being tracked in the Mozo database has plunged from 6.71% p.a. to 6.44% p.a.
"At the start of the year, just over a dozen lenders offered rates of 5.99% p.a. or lower for owner occupiers with a 20% deposit, but now a whopping 71 lenders are," says Mozo personal finance expert, Rachel Wastell.
Wastell says that the lowest rates available on the market at the moment aren't from major lenders though, meaning that many borrowers looking for a more competitive option will need to shop around.
"Unsurprisingly, challenger banks, regional lenders and mutuals continue to lead the pack, with G&C Mutual Bank, Australian Mutual Bank, People's Choice and The Capricornian among those with the most competitive deals," Wastell says.
"While some of the lowest rates require hefty deposits or significant home equity, borrowers with just a 10% deposit can still benefit, with 13 lenders offering variable home loan rates under 5.75% for these borrowers."
What's happening with savings rates?
At the same time as mortgage rates have fallen, the rates being offered by banks to their savings account customers have also nosedived.
"Banks are promoting home loan rate cuts, because they're a win for borrowers, but savings rate cuts are also happening in the background," Wastell says.
"Just over 90% of the banks on Mozo's database have cut savings rates since the RBA move."
That's not to say that there aren't still some relatively competitive rates around. However, Wastell suggests that savers will want to be sure that they can meet the monthly conditions required to activate many bonus rates offers.
"For example, ING's Savings Maximiser has the best bonus rate at 5.40% p.a. for balances up to $100,000, but this reverts to a measly 0.05% p.a. if conditions are not met.
"For those who want a guaranteed rate of return without any conditions, Australian Unity is the one to beat, with a 4.85% p.a. unconditional rate for balances up to $250,000."
Could the RBA cut rates in May?
Looking forward, the Reserve Bank Board's next decision on monetary policy will be made in seven weeks' time when it reconvenes on May 19 and 20.
And as things stand, experts are suggesting that there's a possibility that the official cash rate could be lowered below the 4.00% mark for the first time two years.
In a survey taken before today's RBA meeting, 10 of the 28 experts (36%) polled by comparison website Finder predicted that the next rate cut would be in May.
A major factor in the Reserve Bank's decision making next month is likely to be the direction of inflation. Specifically, the results of Australian Bureau of Statistics' March quarter Consumer Price Index, which is due to be released on April 30.
In fact, in an economic update published last week, the Commonwealth Bank's head of Australian economics, Gareth Aird, noted that a 25 basis point cut in May would be "a done deal" if trimmed mean inflation comes in below the RBA's 0.7% forecast for the quarter.
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