Mozo Money Moves: RBA – will they or won’t they, banks cut fixed rates and the super spending debate

Welcome to Mozo Money Moves, your go-to weekly finance wrap, unpacking the latest shifts in Australia’s financial landscape.

With Australia’s central bank’s next cash rate decision fast approaching, speculation is heating up – will they hold firm, or is a rate cut finally on the horizon? While key economic indicators like inflation and employment remain in flux, banks aren’t waiting around, with several already cutting fixed home loan rates.

Beyond interest rates, we’re diving into the superannuation spending debate, where fresh insights suggest retirees may not be making the most of their nest eggs. Plus, if you're looking to lock in a competitive term deposit rate before potential RBA cuts, now might be the time to act.

From mortgage moves to savings strategies, here’s what’s making waves in finance this week.

5 charts show why the RBA may hold rates in February

Earlier this week, we examined five key economic indicators that greatly impact the Reserve Bank of Australia’s (RBA) Board when deciding whether to adjust the cash rate. The next meeting will take place February 17-18. Here’s a brief breakdown of the statistics:

• Inflation has softened, with annual headline inflation falling to 2.4% – within the RBA’s target range. However, core inflation remains slightly above expectations at 3.2%, and services inflation is still elevated, signalling ongoing price pressures.
• Economic growth is sluggish as household spending weakens under high interest rates, and business investment slows. However, this may not necessitate a rate cut.
• Employment remains strong, with record participation and underemployment at its lowest since early 2023. While the unemployment rate has edged up to 4.0%, it remains below the RBA’s projection, potentially reducing the need for a rate cut.
• Wage growth has been modest, with a 0.8% increase in the September quarter and an annual rise of 3.5%, limiting its impact on inflation. However, labour costs are rising faster than the rate of economic productivity, which could lead to sustained inflation.
• The Australian dollar continues to trend downwards against the US dollar, influencing import costs and inflation. The US tariffs on China won’t help matters.

With inflation easing and employment and wage growth remaining relatively stable, the RBA may consider cutting the cash rate but, based on the data, there are too many unknown variables and a lack of uniform consistency for the Board to adjust rates at the next meeting. Contrary to market expectations, we think the cash rate will remain at 4.35% on February 18.

You can read the entire article to see our in-depth analysis of the five key charts.

Banks trim fixed rates ahead of RBA decision

On Monday, NAB became the first major bank to reduce fixed mortgage rates in 2025, shaving up to 0.25 percentage points off owner-occupier loans and up to 0.3 points for investors.

NAB is offering eligible owner-occupiers, making principal and interest (P&I) repayments with a loan-to-value ratio (LVR) of 80% or less, 5.84% p.a. (comparison rate* 6.74% p.a.) for three years.

Macquarie was the first to act, cutting its one- to three-year fixed mortgage rates by up to 0.16 percentage points in January. Now, NAB’s decision signals a broader shift in the market as banks position themselves ahead of potential cash rate cuts.

Regional Australia Bank made a number of cuts to its variable rates and some increases to fixed rate loans this week. The bank recently proposed a merger with Summerland Bank to become one of Australia's top ten largest customer-owned banks.

IMB reduced variable rates for the second week in a row, lowering them by up to 30 basis points for owner-occupiers with LVRs over 90%. Additionally, Heritage Bank and People’s Choice each lowered their variable rates by 10 basis points, while Auswide Bank increased rates on its variable Freedom Package product by 10 basis points.

What kind of cuts can you expect?

When the Reserve Bank last cut interest rates at the onset of the Covid-19 pandemic, none of the major banks passed the reduction on to existing variable-rate customers.

But the economic landscape looked very different at the time. Government stimulus kept household spending power strong, and many borrowers had built up substantial savings buffers, allowing them to keep up with repayments despite the crisis.

In 2025, banks may be more inclined to pass on rate cuts when the cash rate eventually comes down. With mortgage stress rising and economic growth slowing, lenders will be under pressure to provide relief to borrowers and remain competitive. 

However, be aware that they may not pass on cuts in full. Funding costs, profit margins, and regulatory considerations will all play a role in determining how much of a reduction is actually applied to variable-rate customers.

If rates do fall, borrowers may want to take the opportunity to review their home loan options. Even if banks only pass on partial cuts, refinancing to a lower-rate lender or negotiating with your current provider could still lead to significant savings. You can compare home loan rates on the Mozo database to see how much you could save.

Big four home loan rates: How do they compare?

Australia’s big four banks – ANZ, Commonwealth Bank, NAB, and Westpac – dominate the home loan market, but do they offer the most competitive rates? Mozo's latest analysis compares their mortgage offerings, noting rate movements and how they stack up against smaller lenders. 

While all four banks have cut rates on select home loans over the past year, many challenger banks still provide lower interest rates. Read the full breakdown and be sure to compare your options when shopping around for a new home loan or when refinancing.

Should retirees spend more of their super?

A new Grattan Institute report sheds light on the debate around superannuation and retirement spending, suggesting that many retirees are overly cautious with their funds. While they have the means to enjoy their savings, many opt to under-spend, which has sparked differing opinions on the best approach.

Mozo senior money writer Brad Buzzard interviewed Grattan's deputy program director of housing and economic security, Joey Moloney – who co-authored the report – who says the current system isn’t giving retirees the confidence to use their super as intended.

The Grattan Institute’s solution? A government-backed annuity-style product that provides retirees with a stable income for life, easing fears of running out of money.

In contrast, founder and CEO of digital financial advice platform Otivo, Paul Feeney suggests the best solution starts with better financial guidance, not just default products.

To effectively guide retirees in making the most of their retirement income, Feeney believes it's crucial to help them understand the best mix of income sources. While annuities could be a suitable option for many, retirees may remain hesitant to embrace them without proper context and education.

To learn more and ensure your super is working for you, check out Brad’s insightful article.

Lock in short-term deposits now before rates fall

With expectations of an RBA rate cut growing, now could be a smart time to lock in a short-term term deposit before rates potentially drop. Banks often lower deposit rates in response to cash rate cuts, meaning savers who wait may miss out on higher returns.

The notion that term deposits are “only for boomers” is outdated, says Mozo banking expert Peter Marshall. He says many term deposits offer more flexibility than high-interest savings accounts, are simple to set up and manage entirely online, and can be tailored to align with individual savings goals.

Shorter-term deposits offer flexibility, allowing you to take advantage of any future rate movements while still securing competitive returns now. Comparing rates and locking in a deposit before the RBA moves could help maximise your savings.

According to the Mozo database, six-month (4.38% p.a.), nine-month (4.32% p.a.), and one-year (4.44% p.a.) term deposits currently offer the highest average rates. Australian Military Bank’s six-month Investment Plus term deposit has the highest rate at 5.10% p.a., along with Defence Bank’s Premium Term Deposit at 5.10% p.a. for an 8-month duration.

As part of Mozo’s commitment to making your money count, the Mozo Banking Roundup highlights monthly rate changes and notable banking trends - you can subscribe here.