Key highlights –
- Overall – interest rates have dropped in all categories, with the biggest cuts applied to home loan products.
- Home loans – differential pricing has seen investors paying a margin of 0.21 percentage points above owner occupiers on average.
- Credit cards – purchase rates down slightly on average, but annual fees continue to rise.
- Deposit accounts – more rate cuts this quarter with average online savers and term deposit rates sitting only slightly ahead of inflation.
Commenting on the Rates of the Nation Report, Sally Tindall, Money Commentator:
May The RBA cash rate continued its flat line at 2 per cent this quarter despite speculation of a rate cut before the year was out.
Despite this, home loan rates have gone both up and down in the space of three months. The major banks all chose to hike rates by an average of 0.18 percentage points on the back of APRA’s requirement that they hold more capital while competition at the bottom of the market sharpened with around 25 lenders choosing to cut their lowest variable rates to as little as 3.65 per cent. Unsurprisingly, existing mortgage holders primarily missed out on this news as the majority of these cuts were for new customers only.
The most dramatic change occurred in investor borrowing where there was a $2.1 billion drop in lending figures in just four months. The falls came on the back of the introduction of higher home loan rates for investors of up to 1.44 percentage points, with around half of the market adopting this two-tiered pricing structure. The overall lending figures were also down this quarter, which is another sign the market is decelerating.
We expect lenders will continue to tweak their home loan products in the year ahead in an attempt to reduce risk and control investor growth including a continued tightening of LVR requirements. Differential pricing is also expected to continue to put the squeeze on investors however it’s unlikely such sustained declines will continue.
Credit card providers have been ramping up zero balance transfer deals which now officially dominate the market with over half of all cards now offering introductory rates. Summer deals have also been heating up the market with a number of providers offering vouchers in return for taking up a new card. The Senate inquiry into credit cards made a number of valuable recommendations in relation to reducing entrenched credit card debt, while the government has agreed to better regulate credit card surcharges so it will be interesting to see what is delivered in this space in 2016.
For a more detailed rate analysis please see the full report, attached. For further commentary please get in touch.