If you’re reading this, first of all, give yourself a pat on the back for making it to the end of 2020.
The impacts of the COVID-19 pandemic have been felt in all areas of life, most significantly by those afflicted with the illness, and by our front-line workers. It also cannot be understated how much it has shaken up the Australian economy – particularly interest rates.
This year we’ve watched interest rates plummet to new lows thanks to three Reserve Bank of Australia (RBA) cash rate cuts, including one emergency cut in mid-March. The cash rate now only has 10 basis points separating it from zero per cent, and talk has turned to what exactly a negative-cash-rate environment may look like.
First-time buyers have also attempted to seize a small window in which housing prices shrunk in Sydney and Melbourne, and the First Home Buyer Deposit Scheme bolstered their chances of getting a mortgage with a smaller deposit.
But despite a short-lived recession and rising unemployment rates, housing prices in all capital cities are tipped to boom again in 2021. Thankfully, home loan rates are still rock-bottom, so it’s worth comparing your options if you’re a would-be buyer.
The low interest rate environment hasn’t been ideal for savers, with both savings account and term deposit rates taking a beating in 2020. With savings rates being the first on the chopping block for most banks after a cash rate cut, Aussie savers may be wondering if there’s still good deals out there. But there is hope – if you know where to look.
And with more and more Aussies staying at home, there’s been an interesting shift in vehicle prices. After Covid-19 temporarily shut down vehicle production in March, a shortage of new cars prevented people from trading in their current vehicles. This meant that used car prices have increased in response to a new demand for cars, with used being the most readily available now.
So, with all that being said, here are some of the most competitive home loan, savings account and car loan interest rates on the market for December.
Home loan rates starting with ‘1’ the new norm
As the RBA’s cash rate now sits only 10 basis points away from zero, interest rates on our biggest individual debts – home loans – have never been lower.
This is good news for current home borrowers, as well as budding first home buyers hoping to get a foot on the property market. Home loan repayments have historically never been more affordable in terms of interest.
RateCity research found that since the November RBA cash rate cut, 92 mortgage lenders have decreased their rates. The number of lenders now offering home loans under 2 per cent has risen to 54, with more fixed rate home loans in this category than variable.
Homeowners and would-be-borrowers may find that fixed interest rates starting with a 1 are becoming the new norm. But to nab one of these rates, they may want to consider if fixing their mortgage is the right choice for their financial situation.
Savers bearing the brunt of interest rate changes
It’s not an easy time to be a saver, especially if you’re saving up for something big, like a first home, a wedding or renovations.
With most interest rates sitting below 1 per cent for high interest savings accounts – not to mention most base rates creeping under 0.10 per cent – it’s a hard time to grow your rainy-day fund.
RateCity research found that since the November cash rate cut, over 40 lenders took the axe to savings accounts. The current average introductory savings account rate is now 0.87 per cent, with an average base rate of 0.29 per cent.
Further, the average conditional savings account bonus rate now sits at 0.72 per cent, with an average base rate of a measly 0.07 per cent. If you have a conditional savings account rate and you’re not meeting those conditions for bonus interest each month, your money is earning nearly as little as if it was just sitting in a bank account.
But there is hope for savers, if they know where to look and are willing to consider switching financial institutions. The most competitive savings account rates generally come from competitor providers to the bigger banks, so nabbing one of these high interest rates may require a move. This is because smaller, online or neo-banks have lower overheads and can therefore pass on these savings to their customers through higher-on-average rates.
Here are some of the highest savings accounts on the market:
Car prices on the rise as Aussies splurge on at-home purchases
While we can’t exactly spend our savings on an overseas holiday any time soon, many Australians have taken 2020 as an excuse to purchase a new vehicle.
It’s understandable that our reliance of cars compared to public transport would increase dramatically in response to the Coronavirus pandemic, particularly in bigger cities like Sydney.
But, as mentioned before, the halt in production of new cars meant that demand for used cars increased, as did their prices. For Aussies trying to nab a used car but are struggling to save up for the full purchase price, a used car loan may be able to help you finance your vehicle.
There are a range of options available with competitive interest rates available on the RateCity database. Keep in mind that while there are rock-bottom interest rates on offer, fees, features, conditions and other ongoing costs may impact the repayments of a used car loan.