Is the party over for borrowers? Mozo's Kirsty Lamont

The RBA’s decision to leave the cash rate on hold at 2% was not unexpected and like last month’s cut will likely result in a more subdued response from lenders and savings providers. 

In February, the RBA’s rate cut was followed by a swift and generous 0.25% reduction in variable rates by 93% of lenders, while in May, the reaction was slower and a little more measured with only 33% passing on the full 25bps. Some lenders took up to three weeks to announce a rate decision and a further eight lenders still haven’t made a call either way. 

While the Bank’s first cut incited a proactive response, the most recent decrease meant lenders were forced to make tougher decisions based on their own funding measures and home loan margins. 

These cuts are certainly a good thing for refinancers, with the average rate now a low 4.72% (down from 4.98% in February), and the lowest variable rate a competitive 3.98%.

While we saw a huge number of fixed rate discounts being made in February, that trend has slowed and this month we’re seeing some lenders increase fixed rates for the first time in months. 

It’s possible we’ve hit the bottom of the cycle for fixed rates and while you can, you can still fix your loan for 3 years for less than the leading variable rate – at just 3.95%.  

In the past month, we’ve also seen changes on the investor front, with some of the country’s largest lenders cutting back on discounts and changing lending criteria in a bid to decrease their volume of investor loans, in response to pressure from APRA.

For example, each of the big 4 banks have removed discretionary pricing on investor loans and two lenders (Bankwest and Heritage Bank) have implemented a loan-to-value ratio limit of 80% for new investor loans.

Those looking to build up a house deposit are suffering a double whammy of high property prices and low savings returns. 

While the average property price in one of Australia’s top 8 capital cities will require a deposit of at least $57,000, the average at-call savings account will earn you just 2.43%. The best rate you can get by locking your money away for 6 months is only slightly higher at 3.5%.

Kirsty Lamont is a director at loan comparison site, Mozo.com.au

For information on property loans, rates and more, visit Mozo.com.au or click here for the free Property Observer eBook, Get loan-savvy – tips for a first time, investment or refinancing loan, which helps you decide on a home loan that meets your requirements.