Some of our biggest banks made headlines for cutting interest rates this week, even though the Reserve Bank of Australia has kept rates steady for months. Here's why they're lowering them, and what it means for households.
Some of Australia's biggest banks found themselves in the headlines this week after confirming that they were reducing a handful of their interest rates.
CBA was the first of the major banks to cut almost all of its term deposit interest rates, reducing them by 0.5 percentage points a week ago, with NAB following by the same amount this week, while ANZ lowered its rates by up to 0.8 percentage points."Term deposits have been gradually dropping since the peak in July last year, based on a 12 month deposit," she told the ABC.
Overall, 27 banks have changed at least one term deposit rate since the start of August, with some having both hiked and cut rates. Ms Gordon says the changes to fixed rates is part of a "wider adjustment", and that the rates have also been dropping slowly over time, much like term deposits. Cherelle Murphy, EY's chief economist, says it's indicative of where the the global economy is going, which in turn affects financial markets.
"No-one knows for sure when the cash rate will come down, but banks don't want to be paying too much interest on deposits that ultimately hurt their profit margins.""We shouldn't get too excited by all this ... we're kind of in the Goldilocks scenario at the moment until cuts rates," he says. "What we can see at the moment is wholesale funding costs come down, and the proxy for that is term deposits, so term deposit rates come down.
"I think the real danger is that we overstate the supposed savings that flows through from these rates, because the at-call rates are still incredibly high.Cherelle Murphy from EY agrees that recent headlines about rate cuts "got a bit blown up".
Banks Interest Rates Rate Cuts Home Loans Commonwealth Bank Commbank Rba Westpac Nab Anz Interest Rate Cuts Mortgage Term Deposit Rates
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