After taking a hit from recent deposit rate cuts, Australians with money in the bank have been given some reprieve today with the Reserve Bank of Australia leaving the cash rate unchanged at 2.25 percent.
RateCity data shows that in the past year, bonus savings accounts from the major banks have been cut by 0.78 percentage points on average – more than three times that which was passed down by the RBA.
RateCity’s banking analyst, Peter Arnold, said those most affected by the lower rates included retirees and first home buyers saving for a deposit.
“Savers have been getting the raw end of the deal over the last year with rates cut by well more than the RBA. It’s getting increasingly hard to find a good deal but there are still some out there and you should be aiming for an account with a rate up around the 4 percent mark,” he said.
Good news for savers, but what’s the impact on the property market?
For borrowers, though, the expectation of lower rates has enticed many homeowners to upgrade and would-be buyers to take the step onto the property market.
Home loan interest via RateCity jumped by 60 percent following the February rate cut. Despite this, recent data shows more home borrowers are falling behind on loan repayments.
“With the extremely low interest rates, and house prices quite high, it’s definitely a time for borrowers to be careful about how much debt they go into and we’d urge all Australians not to stretch beyond their means,” he said.
“Rates will eventually go up and when they do you’ll still be on the hook for that debt.”
Latest Fitch Ratings data (March) revealed that mortgage performance had worsened, with those falling behind by 30 days or more on their home loan payments increasing to 1.15 percent (up 7 basis points) in the fourth quarter of 2014.
The RateCity database shows that the most competitive variable rates are now sitting as low as 4.19 percent, which is around 0.88 percentage points below the average variable rate. On a $300,000 home loan, switching from the average to one of the cheapest on the market could save borrowers more than $1800 this year.
To keep an eye on which lenders are moving rates, and by how much, keep an eye on RateCity’s Rate Tracker.