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Future RBA Cuts Could Be Negated By Lender Rate Rises: 1300HomeLoan

Future cash rate cuts by the Reserve Bank of Australia (RBA) are likely to be negated by lenders raising interest rates due to issues such as cost of funding, says mortgage broker network 1300HomeLoan.

1300HomeLoan Managing Director John Kolenda said the RBA‘s cash rate has stayed at a  record low of 2.0 per cent since May this year but there remains expectations of further interest rate relief before the end of the year, and possibly on Melbourne Cup day.

“The RBA has some history in playing a part on Melbourne Cup day and we may see the central bank cut rates once more on the first Tuesday in November or before the end of the year,” he said.

But Mr Kolenda said further rate relief from the central bank may not be passed on in full by lenders, while some borrowers have already been hit with increases to their mortgage rates.

“The decision of many lenders to raise interest rates for investment and interest only loans as well as revised borrowing conditions has already had an impact on many borrowers with more expected,” he said.

“We are likely to see increases from 25 to 50 basis points in out of cycle movements by many banks as they adjust their pricing to accommodate additional costs. They face a balancing act between managing home loan growth and shareholder returns.

“Over the next six to nine months we may see increases in rates across the board with the pressure on the major banks to meet Australian Prudential Regulation Authority (APRA) measures by June next year. This will likely see rates increase for owner-occupied in the future.”

Mr Kolenda said the actions of the banks to increase rates in response to industry and regulatory desires to tackle the growth in investor lending due to concerns about booming Sydney and Melbourne property prices has changed the lending landscape.

“Despite the RBA keeping its cash rate on hold, thousands of borrowers have had their interest rates go up by as much as 49 basis points,” he said.

“These recent months have been confusing times for borrowers with banks lifting rates outside of the RBA’s deliberations and we will see this continue in the months ahead.”

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