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Home Loan HandbookFollowing a recent decision by the Reserve Bank of Australia to reduce the official cash rate by 25 basis points, the impact on savings rates has become a topic of concern for many savers. While home loan borrowers have quickly seen the benefits of lower interest rates, savers are facing a different scenario with diminishing returns on their savings.
Since the rate cut, a significant number of banks, totaling fifty-one, have already reduced at least one of their savings rates. This adjustment translates to customers earning less interest on their savings deposits. The trend of declining savings rates contrasts with the period during the pandemic when savers experienced relatively higher interest rates.
Surprisingly, not all lenders have passed on the rate cut to their mortgage customers. While sixty-six lenders have adjusted interest rates for home loans, one notable exception is Virgin Money, which has chosen not to decrease rates for its home loan customers but has lowered savings account rates instead. This decision by Virgin Money has raised eyebrows within the industry, with experts pointing out the rarity of such actions in the past decade.
Looking ahead, there is a possibility that additional lenders may follow suit in delaying announcements regarding home loan rate changes. Several lenders, including FreedomLend, Liberty Financial, La Trobe, Mortgage House, The Capricornian, and Central Murray Credit Union, are yet to disclose their plans regarding rate adjustments.
On the savings front, Canstar reports that most banks have implemented the full 0.25 percentage point cut on their savings rates. However, the impact of these rate reductions varies, with some banks lowering base savings rates and others reducing bonus rates. Consequently, savers seeking uncomplicated accounts with competitive rates are advised to adjust their expectations due to the prevailing market conditions.
For those interested in securing the highest savings rate available, it currently stands at 5.4 percent, subject to specific monthly conditions. While eight banks offer ongoing savings rates above 5 percent, each account comes with its own set of terms and conditions that must be met to qualify for the advertised rate.
In terms of home loan rates, there are now 32 lenders offering at least one variable home loan rate below 5.75 percent, according to Canstar. Despite most lenders passing on the full rate cut to borrowers, there are instances where new customers receive more significant reductions compared to existing customers.
Looking ahead, economists predict the possibility of further rate cuts by the Reserve Bank of Australia. While there are expectations of additional cuts in the future, the recent meeting minutes suggest that immediate further reductions are not guaranteed. The Reserve Bank board is scheduled to convene again at the end of March, providing further insights into the future direction of interest rates in Australia.
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