Mozo Money Moves: What happened in 2023 and what to look out for in 2024

Welcome to the final Mozo Money Moves for 2023, an annual wrap-up of the trends the Mozo experts have seen in 2023, and key insights into what we’ll be keeping a close eye on in 2024.?

This year Australian consumers continued to battle the rising cost of living, as sticky services inflation drove up costs, particularly in housing and insurance. As households grappled with price rises in 2023, Aussies took on multiple jobs to make ends meet, and consumer sentiment hovered at historic lows.

Mozo experts spent the year writing about how consumers can handle these rising living costs with guides including helpful tips and insights, like this 2023 Cost of Living Guide that senior Mozo money writer Evlin Dubose compiled.

Mortgage repayments also continued to rise due to the five RBA cash rate hikes, and the federal government announced some big changes to how Australia’s central bank is run, including the appointment of a new central bank Governor, Michelle Bullock and a new 2024 meeting schedule.

Mozo’s research and data experts have also been busy, making over 45,000 updates and changes to the Mozo database in 2023, with tens of thousands of those changes occurring as banks shift rates across key personal finance products.

We also introduced this Mozo Money Moves weekly series in 2023, to keep our audiences informed of the latest rate changes and financial trends, to complement Mozo’s monthly Banking Roundup - which you can sign up to here.

With that in mind, let's dive in.

Home Loan Moves in 2023

The Reserve Bank of Australia (RBA) orchestrated five cash rate hikes in 2023, February, March, May, June, and November. These hikes by the central bank have taken the cash rate from a starting point of 3.10% in January to 4.35%.

The June rate hike was unexpected, catching many economists off guard, and after an extended pause that gave some mortgage holders hope we’d reached the cash rate peak, our experts predicted the November rate hike, which added 25 basis points to home loan rates just in time for Christmas.?

Lenders were quick to pass on the rate hikes this year, and the average home loan variable rate surged from 5.68% in January to a staggering 6.84% by December*. That translates to an additional $359 in monthly repayments for a $500,000 loan.

Mozo’s 2023 research also revealed some interesting statistics about how these rate rises are impacting households in regard to how much of their monthly household income is now being spent on their home loan.

According to the data, 1 in 6 Australians now allocate 40-60% of their monthly household income to rising home loan repayments, while 5% of homeowners are paying more than 60%**.?

Mozo did see some lenders cutting some variable rates throughout the year, amidst the rate hikes, and according to the Mozo database there are still a number of variable home loan rates on the market starting with 5.?

As we mentioned to Domain earlier this year, when it comes to interest rates on your home loan, every basis point counts, as as little as 0.5% difference in rates can equate to tens of thousands of dollars in interest over a 25 year term, so if you’re on a rate starting with 7 or 8, it could be a good time to shop around.

Savings Accounts & Term Deposit Moves in 2023

This year, RBA rate hikes were passed on quickly by lenders to home loan rates, but savings rate hikes were not as immediate. Despite this, the average ongoing savings rates have shown a similar jump to the average variable home loan rate (from January 2023 to now) increasing by 1.22%.?

What’s interesting to note is that while the average ongoing savings rate was 2.22% in January 2023, and now sits at 3.24%, the average ongoing bonus savings rate has jumped by a larger amount, from 3.03% in January 2023 to 4.31% in December. Currently, some of the highest savings rates on the Mozo database sit at over 5%p.a.

The jump in bonus rates across banks in the Mozo database reflects a trend we spoke to The Australian and Money Magazine about earlier this year, with banks passing on rate hikes to savers predominantly for bonus rates to gain new customers. As Mozo experts Peter Marshall and Rachel Wastell mentioned, bonus savings rates often have strict requirements, base rates or ongoing rates so as we head into 2024, high ongoing rates or high base rates may be a better choice for those who aren’t on top of these conditions.

In the term deposit space, there have been a number of cuts and hikes throughout the year, and savers willing to lock their money away can now do so for a return of 5%p.a. or more.?

With the cash rate now close to its expected peak, it's unlikely rates will go much higher, however if there’s an uptick to inflation in the release of the quarterly CPI data at the end of January, there is a chance the RBA could hike again in early 2024. If that is the case, term deposit rates pushed a little higher.

While NAB believes we may see another interest rate hike by February up to 4.60%, the other three of the big four are forecasting rates to stay at 4.35%, and the consensus seems to be that rate cuts are now the next money move.?

So, if you have enough savings to lock some away in a high interest term deposit, that could provide a shield from rate cuts in 2024.

Personal Loan and Green Loan Moves in 2023

In the personal loan space, there has also been a significant shift in how consumers are borrowing in 2023, with personal fixed term loans for travel and holidays surging.?

According to ABS lending indicators for July 2023, Australians took out more loans to fund travel and holidays than in the past five years, showcasing a 4.7% increase from June, amounting to a total of $2.3 billion?.

The releases for August, September and October showed the upward trend in personal fixed term loans was continuing, as Aussies turned to loans amid a cost of living crisis, rising 6.1%, 2.7% and 2.1% respectively?.

In 2023, Mozo experts also noticed a shift to risk-based pricing models. Lenders are increasingly adopting a "rates starting from" structure, which allows them to adjust interest rates based on risk factors like credit scores and current debt levels.

The team also noticed a trend in the green finance space, with sustainable finance options offering much lower rates on average. Mozo spoke with Banking day about how green loans for sustainable home improvements average 2.48%p.a.^ lower than standard personal loans, and the reasons why.

In alignment with Australia's mission to become a "renewable energy superpower," the RBA released a report confirming the government's commitment to investing in green loans and green asset-backed securities. And, as green loans offered by banks come with strict eligibility criteria, they provide assurance of genuine sustainability, therefore enabling banks to use green loans as collateral for green asset-backed securities.?

Cheap green loans is a trend Mozo experts will be watching in 2024.

Insurance Moves in 2023

This year was also a significant year for money moves in the insurance space, as Mozo research showed both car insurance and home premiums are increasing at a staggering rate, influenced by an increased risk of natural disasters and inflationary pressures.

In September, Mozo released its Car Insurance Report for 2023, sharing insights our experts gained from the analysis of over 10,000 car insurance quotes as part of the Mozo Experts Choice Awards for Car Insurance?, combined with insights from a nationally representative consumer survey**.?

The data highlighted a 24% increase in premiums compared to last year** and a staggering 47% increase since 2018?, with the average Australian now paying $1,472 a year to insure their car on average?.?

There were notable differences based on various factors, including regional discrepancies, with Victoria ($1,817) and NSW ($1,717) residents paying the most, and South Australians paying the least ($1,295?).

As part of the 2023 Mozo Experts Choice Awards for Home Insurance experts analysed data from the same consumer survey, to find that Australians in natural disaster prone areas are facing the brunt of the pressure.

Almost 2 in 5 Australians who cancelled their home insurance policy in the last 12 months, due to the rising cost of coverage lived in areas affected by natural disasters**.?

Mozo experts also found Australians with rising home insurance policy premiums are on the hook for hundreds of dollars or more on average than last year ($316) at a cost of $1,460/year**.

And, that’s a wrap for 2023!

Mozo Money Moves will be back on the 12th January 2024 to continue our weekly analysis of the key money moves in the personal finance space, including an update on what happened over the Christmas break.

From the team at Mozo, we wish you a very Merry Christmas and a Happy New Year. Here’s to making your money count for more in 2024, with more savvy saving (and spending) tips on the horizon.

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.As a part of Mozo’s commitment to making your money count for more, each month we “roundup” the rate changes, key banking trends and money moves in the Australian personal finance market.?

If you’d like to see the analysis in full once it’s released, you can subscribe to receive the Mozo Banking Round Up here.

*Based on a $400,000 owner occupier home loan, principal and interest with an 80% LVR according to the Mozo database. Mozo aims to, but cannot guarantee that all products on the market are included in the Mozo database.

** Mozo.com.au commissioned a nationally representative consumer research survey via Researchify, surveying 2,141 Australians, aged 18 years and over, from 30th August to 11th September 2023.

?Australian Bureau of Statistics (ABS) Lending Indicators for the months of July, August, September, and October 2023.

^Based on the average personal loan minimum advertised rates in the Mozo database for both variable rates and 3 year fixed terms, including unsecured and secured loan options. The 2.48% difference is calculated from the overall average of 9.24% and the average for loans that are only available for green purposes 6.76%, as of 7th December 2023, with a loan amount of $15,000.

?For the 2023 Car Insurance Awards, Mozo’s expert judges collected information from 10,000 different quotes for Car Insurance for the Exceptional Value categories and 58 car insurance policies from 51 insurance providers for the Exceptional Quality categories. Read the methodology report here. The information collection was conducted in July and August 2023.??

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