The Reserve Bank of Australia dropped the cash rate by 0.50% to 3.75% at its meeting on the 1st May. What does this mean for our members?
As a small financial institution, Circle has always been a price follower and moved interest rates in response to market movements. As a general rule we try to price our loans (particularly home loans) lower than the major banks and our term deposit at the higher end of the market.
In recent times the major banks have competed for retail term deposits more intensely and this has resulted in higher than usual interest rates. This increased competition has benefited term depositors but now means that Circle can’t always match the highest rates on offer although we believe our rates will always be competitive.
For home loan borrowers the major banks are trying to break the relationship between movements in the official cash rate and their mortgage rates. Whilst there has always been other factors that have a greater impact on home loan rates (ie cost of funds), the banks have created a perceived link between movements in the cash rate and their home loan rates by their practices in recent years where the timing of both has been closely aligned.
Circle’s interest rates are set with careful focus on our net interest margin as maintaining margin is necessary to cover our operating expenses.
I believe that Circle offers our members a wide range of competitive products backed by excellent service and encourage all members to fully utilize their own financial institution.