Reserve Bank of Australia's Governor Michele Bullock is now not expected to drop rates for a year. Picture: NewsWire / Christian Gilles
Borrowers spent months watching the Reserve Bank for rate relief that won’t arrive - but the equivalent of more than two full rate cuts are now there for the taking.
While the RBA holds firm for what Big Four bank ANZ expects will be a year, smaller lenders are quietly repricing the mortgage market - and the savings on offer are now more than double a standard rate cut.
Canstar’s database shows below average variable rates on offer for owner-occupier. Source: Canstar
The gap between the average variable home loan rate and the lowest one currently on the market has expanded to 57 basis points, according to the Canstar.com.au database - more than double a standard RBA cut of 25 basis points.
The average owner-occupier variable rate now sits at 6.26 per cent while the lowest available on the database is 5.69 per cent. On a $600,000 loan, that difference amounts to thousands of dollars saved every year.
They join a wave of smaller lenders and credit unions quietly repricing the mortgage market, with Canstar’s data finding 41 lenders now sit under the 6 per cent mark on variable rates for owner-occupiers.
For investors the picture is similarly competitive - 46 lenders now offer a variable rate under 6.25 per cent, with the lowest investor variable rate at 5.85 per cent against an average of 6.50 per cent.
The lowest fixed rates for owner-occupiers at present on the database. Source: Canstar
For borrowers wanting certainty over variable movements, fixed rates now start from 5.99 per cent across one, two and three-year terms - the same floor rate across all three, meaning there is currently no penalty for locking in longer.
This as RBA Assistant Governor Dr Sarah Hunter fronted a room full of economists in Canberra last week and made clear the bank had got some of it wrong - inflation ran hotter than it expected and the board was now navigating a much messier picture than anyone anticipated.
She admitted the economy over the past year had surprised the RBA - a stronger-than-expected spending surge, a data centre building boom nobody saw coming and global trade that shrugged off tariff fears far quicker than forecast all combined to push prices higher.
“There were a number of factors that played out differently to how we were expecting,” she said.
RBA assistant governor (economic) Dr Sarah Hunter has signalled economic growth will need to be slower to return inflation to its target band. Picture: NewsWire / Martin Ollman
With the RBA caught out, inflation still sticky and rate cuts definitely not around the corner, the August board meeting - now just weeks away - will be informed by a fresh round of economic forecasts.
Dr Hunter also flagged that consumer sentiment had hit a record low after the Middle East conflict erupted and the housing market was cooling fast.
ANZ economist Sophia Angala said the ANZ-Roy Morgan Australian Consumer Confidence index recorded a slight rise of 0.6 points last week - but remained deeply depressed at 75.3, less than half the long-run average of 108.7.
“The lift was driven by improving confidence in economic and financial outlooks over the next 12 months, with the latter subindex at its highest level since early March,” she said.
Weekly inflation expectations rose last week, after four consecutive weekly declines, the ANZ-Roy Morgan Australian Consumer Confidence index found - which economists say may reflect inflation risks, as the Middle East conflict re-escalated during the survey period. (Source: ANZ)
“The decline in confidence in the medium-term economic outlook occurred in the same week as the speech by RBA Assistant Governor Hunter, as we see noting that economic growth will need to be slower to return inflation to the RBA’s 2–3 per cent target band.”
Weekly inflation expectations also nudged higher to 5.7 per cent after four consecutive weekly declines, which economists say may reflect inflation risks as the Middle East conflict re-escalated during the survey period.
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