Official cash rate unmoved at 1.50% following May RBA meeting

By Tom Watson · · 4 min read
Fact Checked

With predictability to rival a Japanese train, the Reserve Bank board has announced a 19th consecutive hold for the official cash rate which remains at a record low 1.50% following today’s meeting in Sydney.

The latest decision means that the Reserve Bank board haven’t shifted the cash rate since August 2016, which resulted in a 25 basis point cut, while last rate rise dates all the way back to November 2010.

In his statement on today’s decision, Reserve Bank Governor Philip Lowe highlighted inflation, which remains below the target level of 2-3%, as one of the reasons for maintaining the status quo.

"The recent inflation data were in line with the Bank's expectations, with both CPI and underlying inflation running marginally below 2 per cent. Inflation is likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing," he said.

"The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual."

The decision to hold rates for at least another month was hardly unexpected, especially given Governor Lowe’s comments from the RBA’s April 3 Monetary Policy Meeting in which he indicated that there was, “not a strong case for a near-term adjustment in monetary policy.”

RELATED: APRA announces plan to remove 10% investor lending benchmarks, but what will that mean for borrowers?

According to Mozo Product Data Manager Peter Marshall, sluggish movement in a number of key economic indicators suggests that a shift in sentiment from the RBA could remain unlikely in the near future.

“We’re already coming up to halfway through the year, and so far there’s been little case built for a rate increase,” he said.

“If it was going to happen this year we’d have seen some positive indicators by now, so in their absence I’m calling rates on hold until 2019 - possibly the middle of 2019, or even 2020.”

Could funding pressure put the squeeze on home loan lenders?

While the official cash rate has remained stable for yet another month, the same can’t be said for some home loan lenders , with the Mozo database revealing both a number of cuts and hikes to mortgage rates during the month of April.

Heritage Bank and ING were among the lenders to make widespread reductions to a range of variable home loan rates, while online lender ME cited increased funding costs in its decision to hike a number of variable rates.

And with funding pressure expected to increase as a result of higher interest rates in the United States, banks and other lenders in Australia could further hike home loan rates.

“A number of banks have already lifted their rates in response to this funding cost squeeze, and I fully expect that more lenders will be forced to follow suit in the future,” said Marshall.

Have a look at some of the lowest home loan rates currently* in Mozo’s database:

Best variable rate home loan offers

  • Reduce Home Loans Rate Lovers Variable Home Loan - 3.39% (comparison rate: 3.46%)
  • Easy Street Standard Variable - 3.49% (comparison rate: 3.52%)
  • Freedomlend Variable Home Loan - 3.49% (comparison rate: 3.55%)
  • Tic:Toc Variable Home Loan - 3.52% (comparison rate: 3.53%)

Best fixed rate home loan offers (3 year term)

  • Easy Street Special 3 Year Fixed - 3.69% (comparison rate: 4.11%)
  • Newcastle Permanent Fixed Rate Home Loan - 3.74% (comparison rate: 4.59%)
  • UBank UHomeloan Fixed - 3.74% (comparison rate: 4.01%)
  • Greater Bank Discount Ultimate Fixed - 3.74% (comparison rate: 4.45%)

Term deposit turn around

It feels like an age, but the tide may finally be turning for Australians looking to put their savings into a term deposit account, with rate increases outweighing cuts for the second consecutive month.

Savers looking for some joy through their savings account will likely have to keep waiting though, as figures from the Mozo database revealed just a single rate increase amongst a number of rate cuts for savings account throughout April.

Check out some of the best rates currently* in the Mozo database for both term deposits and savings accounts below:

Best term deposit offers (based on a balance of $25,000)

  • 1 Year: 2.80% ME
  • 2 Year: 2.90% ING & Police Bank
  • 3 Year: 3.00% Greater Bank, Heritage Bank, Maitland Mutual, ME, PCCU, QBANK & Qudos Bank
  • 4 Year: 3.10% Greater Bank
  • 5 Year: 3.20% AMP & Greater Bank

Best ongoing savings account offers

  • RAMS Saver Account - 3.00% (when you deposit a minimum of $200 and make no withdrawals every month)UBank USaver with Ultra Transaction Account - 2.87% (when you deposit at least $200 into the account or a linked Ultra Transaction Account every month)
  • ME Online Savings Account - 2.85% (when you make a weekly tap and go purchase with a ME Everyday Transaction Account Debit MasterCard)
  • Australian Unity Active Saver - 2.80% (when you make a minimum deposit of at least $250 and no withdrawals each month)
  • ING Savings Maximiser - 2.80% (when you deposit $1,000 or more each month from a linked Orange Everyday account as well as make at least five purchases on your credit or debit card)

Interested in comparing a range of banking offers for yourself? Mozo’s handy comparison tables are a great place to start, so start comparing a range of home loans , term deposits and savings accounts today!

*Rates accurate as of May 1, 2018.

Read last month's Reserve Bank interest rates update.