Rate relief restricted to home loans

The short-term outlook for interest rates changed little over the week to Friday, 12 September, with financial markets priced to allow for the next step down in the Reserve Bank’s cash rate target in November rather than October.

RBA governor Glenn Stevens, in an appearance before a parliamentary committee, noted that households are at more cautious about spending and borrowing, but perhaps only for now. Steven noted that petrol is now cheaper and tax cuts are of course in place, so perhaps the household outlook may improve over coming months.

For now consumers and business may (but may not) experience lower interest rates given the cut to the cash rate a week and a half ago. This rate cut flowed through quickly to most home loan customers but there are still no cuts to credit cards rates or personal loan rates.

The most marked cuts in interest rates are taking place among term deposits. Many term deposits, and only a few at-call rates, have declined in excess of the 25 basis points, reflecting the steeper fall in bank bill rates. One-month to six-month BBSW has dropped to around 7.2 per cent, effective yesterday, with nine- and twelve-month rates a few points below seven per cent. Cuts in three- and six-month term deposit cuts vary little from 25 basis points.

Infochoice.com.au