Australians have saved a record $1.62 trillion, but a looming RBA rate cut and vanishing high-interest savings accounts are pushing buyers back into the property market. Picture: Mark Stewart
Household savings have hit a record high, but a looming cash rate cut could wipe out the last of the 5 per cent savings deals.
Fresh APRA data shows Australians added another $6.3bn to their bank balances in May, pushing total household deposits to $1.62 trillion.
The figures come as buyers return to the housing market, encouraged by growing expectations of a July Reserve Bank rate cut and more favourable borrowing conditions.
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But high-interest savings accounts are disappearing fast.
Just four banks are still offering ongoing rates of 5 per cent or more, according to Canstar.
Two providers, BCU and P & N Bank, cut their highest rates from 5.00 to 4.90 per cent last week, reducing the number of 5 per cent products on the market.
BOQ’s Future Saver account has the highest ongoing rate at 5.10 per cent, but only for customers aged 14 to 35 who meet monthly deposit and spending conditions.
CBA, ANZ, Westpac and NAB all grew their mortgage books in May, with CBA leading the charge after adding $3bn in new home loans in just one month.
Other top accounts with 5.00 per cent offers include ING, Westpac and MOVE Bank.
Canstar insights director Sally Tindall said further rate cuts would likely bring the curtain down on high-yield savings options.
“Rates starting with a ‘5’ are fast becoming an endangered species,” Ms Tindall said.
“If the RBA cuts next week, they could be extinct within days.”
At the same time, banks are growing their mortgage books.
Canstar’s Sally Tindall warns “rates starting with a ‘5’ are fast becoming an endangered species” as savings returns plummet ahead of a potential RBA cut.
CBA added almost $3bn in residential loans in May, the largest monthly increase among the major lenders.
Over the past year, the bank’s mortgage portfolio has grown by $34bn.
NAB and ANZ also recorded solid growth in the month, up 0.5 and 0.6 per cent respectively.
Buyers’ advocate and broker Madeleine Roberts says young buyers are re-entering the market, many with 20 per cent deposits and a long-term investment mindset.
M R Advocacy director and co-founder of Scale Lending Mortgage brokers Madeleine Roberts said more clients were re-entering the market, often with full deposits.
“A lot of our buyers are coming to us with 20 per cent deposits,” Ms Roberts said.
“That shows real discipline, especially considering how expensive life is right now.”
Ms Roberts said falling savings rates and the threat of rising prices had pushed many buyers to act.
“There’s a real sense of urgency,” she said.
“Some buyers are desperate to get in before rates fall further.
Falling savings rates and rising property interest are shifting buyer behaviour, with experts warning that urgency and competition may lead to overpaying.
“That’s leading to more competition — and in some cases, overpaying.”
She said younger buyers in particular were more willing to look at long-term strategies, but warned that rapid purchases could limit future capital growth.
“If you’re buying at auction and paying top dollar, you need to think about a 10-year plan,” Ms Roberts said.
“Otherwise, it could take years to make that money back.”
Buxton ACOM’s Peter Serafino said enquiry levels at open homes had picked up since May.
“We’re seeing more buyers and more interest, but not all of it is converting just yet,” Mr Serafino said.
“People who have been saving steadily are starting to feel like it’s time to move.”
Mr Serafino said move-in ready homes priced between $1m and $2m were performing strongest.
Buxton ACOM’s Peter Serafino says turnkey homes under $2m are attracting strong demand, but warns rising borrowing power may fuel price growth. Picture: Jake Nowakowski
“Anything turnkey under $2m is still seeing solid competition,” he said.
Mr Serafino added that falling rates would give many buyers more financial firepower.
“As borrowing power increases, so will prices, particularly if stock levels remain tight,” he said.
The Buxton ACOM agent said. sellers, meanwhile, were becoming more realistic.
“A lot of our sellers have already bought, so they’re more motivated and open to negotiation,” Mr Serafino said.
“Last year was more about investors cashing out. This year feels different.”
With the Reserve Bank meeting due next Tuesday, analysts say the July decision could shape buyer sentiment into spring.
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