Major Banks Cut Interest Rates Amid RBA’s Steady Cash Rate
In a surprising turn of events, significant Australian banks such as NAB and ANZ have reduced interest rates for term deposits and fixed home loans, despite the Reserve Bank of Australia’s (RBA) decision to maintain the cash rate at 3.85 per cent last week.
NAB announced reductions of 5 to 20 basis points across various term deposit offerings. Notably, the bank’s 7-month term deposit rate has been lowered by 20 basis points to 3.80 per cent. This move places NAB among 17 financial institutions that have adjusted their term deposit rates following the RBA’s decision.
Rachel Wastell, a personal finance expert at Mozo, remarked to Yahoo Finance about the significance of such widespread rate cuts. “When 17 banks—both major and minor—reduce term deposit rates within a week, it signals a shift in the market,” she said.
In her analysis, Wastell indicated that the cumulative action from lenders suggested they were anticipating further monetary easing. “Despite the RBA’s hold, the market is adjusting these forward-looking products in anticipation of future cuts,” she noted.
ANZ has also made its move, reducing the interest on its 8-month advance notice term deposit by 10 basis points to align with NAB’s rate at 3.80 per cent. Banks including Bank Australia, Judo Bank, and People’s Choice have followed suit with similar reductions.
In addition to term deposits, fixed home loan rates are dropping. Four lenders have announced reductions after the RBA’s recent meeting, with QBANK implementing cuts of 20 to 30 basis points. Other banks like SWS Bank, Coastline Bank, and The Capricornian are also making adjustments.
Wastell emphasised the impact of these rate shifts on both savers and borrowers, suggesting that current trends were a clear indicator of banks’ expectations regarding future cash rates. “If banks believed rates would remain stable, we wouldn’t see term deposits and fixed-rate home loans declining,” she said.
Forecasts of Future Rate Cuts
The projections regarding future RBA interest rate movements vary among major banks:
- CBA anticipates two rate cuts by August and November, bringing the cash rate down to 3.35 per cent.
- Westpac is forecasting four cuts over the next year, culminating in a cash rate of 2.85 per cent by May.
- NAB expects three cuts throughout the same period to reach a cash rate of 3.10 per cent.
- ANZ holds a similar outlook with two upcoming cuts.
Canstar estimates suggest that, with two further cuts, mortgage holders with a $600,000 mortgage could see their minimum repayments decrease by approximately $180. Should four cuts materialise, this could rise to nearly $350.
While these predictions are favourable for mortgage holders, they offer a cautionary note for savers. Wastell warns that peak term deposit rates may soon become a thing of the past. “Banks are strategically repositioning themselves for upcoming rate cuts, meaning current rates will diminish,” she cautioned.
She advised savers who are considering term deposits to act quickly: “Now is the time to lock in a deposit, as banks are not waiting for the RBA, and current leading rates are set to decline.”
In summary, while the RBA has opted to hold the cash rate steady, the actions of major banks signal a shift towards potential rate cuts in the near future. Savers and borrowers alike should stay vigilant in light of these developments, as the financial landscape continues to evolve.
