COVID-19 rewards borrowers, but savers feel the pain

The Reserve Bank is expected to leave the cash rate on hold at 0.25 per cent when it meets this afternoon.

But RateCity data shows home loan and deposit rates have continued to tumble in the past month:

• 19 lenders have cut at least one variable home loan rate;
• 22 lenders have cut at least one fixed home loan rate;
• 33 banks have cut at least one savings rate;
• 78 banks have cut at least one term deposit rate.

RateCity analysis shows competition in the home loan market means an average borrower taking out a $400,000 home loan at the lowest 2-year fixed rate today, compared to a year ago, would pay $7,344 less in interest over the two-year fixed period.

However, putting $25,000 in a 12-month term deposit at the highest available rate would see savers $235 worse off today compared to a year ago. See assumptions at end.

Market-leading rates for new customers

Source: RateCity.com.au. Note: Data accurate as of 07.07.2020.

Sally Tindall, research director at RateCity.com.au, said, “The cash rate has been on hold since the March 19 emergency rate cut, but despite this, rates keep tumbling.”

“It’s been a record-busting month for mortgages as lenders leapfrog each other in a bid to offer the lowest-rate home loans,” she said.

“With refinancing on the rise, lenders have to keep whittling down their rates if they want to be in contention for these borrowers.

While big cuts have been handed down to new home loan customers, savers haven’t been spared the pain of record-low rates.

“Competition in savings rates is near non-existent at the moment, particularly among the bigger banks who have seen their deposit books increase during COVID-19.

“We’re unlikely to see any real turnaround in savings rates for months, or more likely years to come,” she said.

• Notes: the above home loan calculations are based on an owner occupier paying principal and interest with a $400,000 home loan, fixing for two years at the lowest nationally available rate. For term deposits, calculations are based on interest paid at maturity for a $25,000 deposit at the highest available rate.

Compare home loans in Australia