Only one lender cut fixed rates last week despite the Reserve Bank’s unexpected decision to hold the cash rate steady, according to Canstar.
The Capricornian reduced 10 fixed home loan rates for both owner occupiers and investors by an average of 0.22%, making it the sole mover in an otherwise still market.
“The bombshell pause from the Reserve Bank this week evoked a similarly lacklustre response from the mortgage market with just one bank cutting fixed rates,” said Sally Tindall (pictured), Canstar data insights director.
The average variable interest rate for owner occupiers paying principal and interest sits at 6.23%. Among the most competitive rates:
Canstar now lists 759 home loan rates under 5.5%, up from 750 the previous week.
RBA’s July pause has left the market in limbo, with borrowers and lenders alike awaiting the next round of economic data.
“As it turns out, the RBA isn’t overly game to move again until another round of quarterly core inflation figures land in the target band,” Tindall said.
“The central bank has put itself in a rock and a hard place with its communication strategy. Economists, markets and households want a clearer steer on the RBA’s thinking, yet the bank is unwilling to do this in between meetings in fear of influencing individual opinions on the board.”
Minutes from the July meeting are due next week and are expected to provide greater clarity. But as Tindall explained, the real turning point will be the June quarter CPI, set for release on July 30.
“All eyes are now firmly on the June quarter CPI figures due on 30 July because that’s the golden goose the RBA has said it will be watching,” she said.
In addition to inflation, upcoming employment data due tomorrow could sway the RBA’s next move.
“The bank will also be keenly trawling through the next round of employment figures out on Thursday,” Tindall said. “Any unexpected negative move in jobs data could tip the RBA into a cut, however, with unemployment sitting at 4.1% for five consecutive meetings, it's hard to see the needle swinging wildly at this point.”
With the next RBA decision due on Aug. 12, Tindall advises borrowers to consider refinancing or switching if a better rate is available now – rather than waiting for potential central bank action.
The Reserve Bank (RBA) is widely expected to cut the cash rate by 25 basis points to 3.6% in August, following its surprise decision to hold at 3.85% in July. A Reuters poll of 30 economists showed unanimous support for an August cut, with most also predicting another reduction by the fourth quarter. All four major banks – ANZ, CBA, NAB, and Westpac – share this outlook. Most economists expect the cash rate to fall to between 3.10% and 3.35% by year-end, though the path to lower rates is likely to be gradual.
“Borrowers now have a month-long window before the RBA's next move. While for many people, the natural instinct is to wait-and-see what the RBA plates up, this logic fails to stack up because if you can get a variable rate cut now, and then one from the RBA, you’ll be one step ahead of everyone treading water,” she said.
