Often, when talking about the official cash rate, we tend to see it as the be-all and end-all. And while the cash rate is doubtless critical to the ultimate direction of interest rates, they don’t always exactly follow the decisions of the Reserve Bank of Australia.
“What is less known, is that interest rates are constantly on the move,” said Peter Arnold, RateCity product director.
“The November-to-December quarter was no exception, with rate movements across all categories evident.”
In our Rates of the Nation report for the first quarter of 2015, RateCity outlined the various interest rate movements in a number of different categories.
Fixed rates and credit cards see downward trends
When it comes to home loans, five-year fixed rates saw the biggest drop, with a 0.08 percent fall. Variable rates fell a respectable 0.04 percent, but were still higher than fixed rates, ending up at 5.33 percent by January 1.
Much of the fixed-rate movement was due to the non-major banks, something particularly evident in the case of one-year fixed rate home loans. While the majors kept the rate steady at 5 percent between July and January, rates fell gradually among other lenders during this same period.
This suggests that, with both types of rates seeing gradual drops, now could be a good time to do a home loan comparison and see what’s out there — particularly among the non-major lenders.
Credit card rates saw a similar downward trend in this same period, though the report only covers movements among the big four banks. Purchase rates fell from 17.06 percent to 16.91 percent between October 1 and January 1. Also gratifyingly for consumers, annual fees dropped $5.20 in this same timeframe, with fees sitting at $89.34 now.
“This was a shift from the previous three months when we saw the average purchase rate rise,” commented Mr Arnold.
A double-edged sword for savings
While Aussies are no doubt celebrating the savings they’re making from these lower rates and reduced fees, the flip side of that is that these savings are not accruing interest the way they used to.
“It’s more bad news for savers, particularly those living off their bank interest, those with retirement savings, and people saving for a house deposit,” said Mr Arnold. Deposit rates fell between 0.03 percent and 0.12 percent in the same quarter ending January 1.
With more cuts predicted in the future for the cash rate, it won’t get any easier for ordinary savers.