From savings accounts to mortgages: All the rate movements you should know

Two of Australia's major banks announced a discount on fixed rate mortgages this week.

Banks have lowered the interest rates on popular savings accounts, a move described by consumer advocates as "disappointing but not surprising". Source: AAP / Joel Carrett

As borrowers hold out hope the Reserve Bank of Australia (RBA) will lower interest rates and hopefully prompt banks to do the same, three of Australia's big four banks have now lowered the rate on fixed mortgages.

But banks have been revealed this week to have lowered the interest rates on popular savings accounts, a move described by consumer advocates as "disappointing but not surprising".

The Australian Competition and Consumer Commission has previously criticised banks' rate-setting policies as highly complex.

Here's what's changed in the consumer finance sector.

What are the changes to fixed-rate mortgages?

The National Australia Bank cut fixed rates in July and CommBank and Westpac have now followed suit.

Westpac — Australia's second largest home lender — has made cuts of up to 0.8 per cent and now has the cheapest fixed rates of the big four banks, said Sally Tindall, data insights director and financial comparison site Canstar.

Westpac now has the cheapest fixed rates of the big four banks. Source: AAP / Dave Hunt

"These cuts from Westpac are designed to entice borrowers who are sick of the rollercoaster ride a variable mortgage rate can take their finances on," Tindall said.

"It’s highly likely we’ll see more fixed rate cuts in the months ahead as we inch closer to a potential cash rate cut. Whether borrowers take the bait remains uncertain."

Commbank is now offering select new customer variable rates at a discount of up to 0.35 per cent.

Australian Bureau of Statistics data shows just 2.6 per cent of mortgages are on fixed, as opposed to variable, rates, — up slightly from historic lows in April but well down from 46 per cent in July 2021.

What are the changes to term deposits?

Term deposits are a type of savings account used to lock money away for a fixed term with a fixed interest rate.

Term deposits have been at a higher rate than usual since the RBA started its rate-hiking cycle two years ago.

But data from financial comparison site Canstar shows deposit rates offered by Australia's big four banks have been lowered by between 0.2 per cent and 0.65 per cent over the past six months.

Tom Abourizk, head of policy at consumer advocate Choice, said banks clearly don't fear losing customers, pointing to a lack of competition in the sector.

"The big four banks are always trading on their brand name and as a result are not offering people a very good deal in most cases," he said.

"This is disappointing but not surprising."

Credit card interest rates have increased

New analysis this week from comparison site Mozo revealed that although the total credit card debt of Australians has nearly halved in the last decade — from $31.8 billion to $17.5 billion — annual fees have shot up.

Average annual credit card fees have climbed 25 per cent to nearly $135 in the last 10 years. Source: AAP / AAPIMAGE

Average annual fees have climbed 25 per cent to nearly $135 in the last 10 years, while the highest annual fee nearly doubled from $700 to $1,200.

The number of low-rate credit cards offering a 1-10 per cent interest rate has surged by over 600 per cent.

What has the Reserve Bank of Australia said about the cash rate?

The RBA has threatened to raise the cash rate again if inflation doesn't go down.

The RBA has judged that the risk of inflation not coming down to the target of 2-3 per cent next year has "increased materially ... because of several developments", and the bank could act to raise interest rates and avoid pushing back the timeline.

However financial markets have priced in a cut to interest rates by the end of the year due to rising unemployment and sluggish economic growth, IG market analyst Tony Sycamore told SBS News.

The RBA has threatened to raise the cash rate again if inflation doesn't go down. Source: AAP / AAPIMAGE

"Investors also didn't believe New Zealand's central bank in May when they threatened to hike rates," he said.

Last week the Reserve Bank of New Zealand cut the official cash rate from 5.5 to 5.25 per cent, making its first cut in four years and arguing the country is in a recession.

As New Zealand, the UK, US and EU all move to lower interest rates, independent economist Saul Eslake said people "shouldn't be surprised" the RBA is not doing the same.

"Inflation hasn't fallen as much, or as quickly, as in the US, the UK, Canada and NZ, but unemployment hasn't risen as much as in those countries either", he wrote on LinkedIn.

"That's (in large part) because the RBA was later to start raising rates, and hasn't raised them by as much, as its peers: so it shouldn't come as any surprise that they won't be as quick to start cutting them as their peers have been".