When the Reserve Bank cut the official cash rate by 25 basis points last month, lenders reacted quickly, letting customers know home loan rates were dropping.
However, they have been slower to explain how the changes will affect savings rates.
Unlike the relief felt by home loan borrowers, a lower savings rate means customers will earn less interest on their money in the bank.
It, of course, follows a period of savers enjoying earning higher interest on their accounts, compared to the record low rates during the pandemic.
Here’s what we’ve heard from banks on interest rates and what it means for savers.
Have all lenders passed on the cut to borrowers?
Surprisingly, no.
Sixty-six lenders have dropped interest rates for mortgage customers on at least one of their variable loans.
Just one has said it will not move on rates — Virgin Money will not pass on the cut to its home loan customers.
However, it will lower the interest rate on savings accounts, as of April 2.
“Our rate decisions are well-considered, ensuring that we provide our customers with a competitive proposition aligned with our funding costs and the needs of all our stakeholders,” a spokesperson told ABC News.
“Virgin Money home loan and savings rates are competitive and remain aligned with market.”
Graham Cooke, the head of consumer research at comparison website Finder, described Virgin’s decision on mortgage rates as “very surprising”, given how eager other lenders were to please customers with a cut.
“I don’t recall this ever happening over the last 10 years of my work in this area,”
he said.
Virgin Money Australia is a digital bank and has been owned by the Bank of Queensland Group since 2013.
“Virgin Money’s retail home lending growth declined in 2024, so the decision here may be because the BOQ Group, which owns the brand, wants to focus more on the business lending market,” Mr Cooke said.
There is a chance others will join Virgin Money, as there are a small number of lenders who haven’t even announced their plans.
| Lenders yet to announce home loan rate changes: |
|---|
| FreedomLend |
| Liberty Financial |
| La Trobe |
| BankWAW |
| Warwick Credit Union |
| Cairns Bank |
| Bank of China |
| Mortgage House |
| Household Capital |
| Source: Finder |
What about savings rates?
Fifty-one banks have cut at least one of their savings rates since the February RBA decision, says Canstar, a financial comparison site. That’s as of March 6.
Most have passed on the full 0.25 percentage point cut.
“The majority of banks take the knife to key savings rates to recoup the cost of cheaper mortgages at the other end of the equation,” Canstar data insights director Sally Tindall said.
Not all cuts to savings rates will have the same impact, either, with some banks reducing their base savings rates, while others have decreased bonus rates.
“Savers looking for a straightforward account that doesn’t come with any complicated terms and conditions can kiss goodbye to rates starting with a ‘5,’”
Ms Tindall said.
What is the highest savings rate?
The highest ongoing savings rate is now 5.4 per cent — but there are monthly terms and conditions that need to be met to qualify for that rate.
Canstar’s database shows eight banks offering at least one ongoing saving rate above 5 per cent, although each one comes with monthly conditions.
(That excludes children’s accounts but includes accounts promoted to young adults.)
So, to know what you’re signing up for and the rate you’re likely to actually get on your savings, be sure to check the fine print.
“A competitive savings rate is one that delivers at least 4.75 per cent on an ongoing basis, while a highly competitive savings rate is still one that sits above 5 per cent,” Ms Tindall said.
What have home loan rates dropped to?
There are 32 lenders offering at least one variable home loan rate under 5.75 per cent, according to Canstar.
“If you’re an owner-occupier, paying principal and interest, a good rate starts with a 5, not a 6,” said Ms Tindall.
Most lenders passed on the full 25 basis points cut — however, some treat new and existing customers differently.
“We have seen some new customer variable rates drop by more than the 0.25 percentage points,” said Ms Tindall.
“But some existing variable customers are not getting the full cut.”
Will there be more rate cuts to come?
Probably, if market pricing and economists’ forecasts are to be relied upon.
The RBA cut the cash rate by 25 basis points to 4.1 per cent at its February meeting.
The RBA didn’t want to cut rates too late, governor Bullock says
Economists have been forecasting more cuts to come this year, with the big four bank economists predicting between one more (ANZ) and three more (CBA, NAB, Westpac) cuts.
However, the minutes of the meeting, released this week, and comments by the RBA governor post-decision, suggest further cuts may not happen immediately.
“Members agreed that their decision at this meeting did not commit them to further reductions in the cash rate target at subsequent meetings,”
the minutes stated.
The Reserve Bank board will meet again on March 31 – April 1.
