Interest Rate Update (October 2021)

The following graph shows movements in both the 6 month and 3 year Bank Bill yield rates, for the period January 2018 to date. 

These rates are wholesale rates which are net of any margin charged by financial institutions. It is not uncommon for retail premiums for 3 year fixed rates, to be 0.30% pa or 30 basis points above the wholesale premium.  

Currently the 6 month wholesale Bill rate is 0.04% pa and the 3 year wholesale Bill rate is 0.47% pa, a premium of 0.43% pa or 43 basis points for the longer term.  The 3 year Bill rate has appreciated significantly from the low of 0.08% pa in November 2020.  

This is due to increased optimism regarding the economic recovery from COVID-19 in the near future. The 6 month wholesale rate though has not reflected this optimism, most likely due to the ongoing lockdown in the eastern states. This indicates that at present, variable rates will provide better value than fixed rates for clients in a strong financial position, as the premium for the longer term has grown.