Banks have been slammed for out-of-cycle rate hikes, but their next out-of-cycle moves could have borrowers applauding.
With the RBA
choosing to leave rates on hold yesterday, some industry figures have claimed banks may choose to move independently to spur home loan demand. Banks have been roundly criticised for failing to pass on previous RBA
cuts in full. RateCity spokesperson Michelle Hutchison has said this could give lenders room to move independently of the Reserve.
"Even though the Reserve Bank left the cash rate on hold today, it's possible that financial institutions will make the unprecedented move to cut rates out-of-cycle. Lenders have kept on average 40 basis points of the RBA
's 175 basis point cuts and with wholesale funding pressures reportedly lower, lenders have room to move," she said.
Loan Market spokesman Paul Smith agreed, saying lenders may use the strategy to bolster demand.
"With the cost of funds pressure easing for many lenders, there’s an opportunity for them to make adjustments to their variable rates in attempts to attract new customers. The action or inaction from lenders in the following weeks could be indicative of what’s in store for interest rate movements over the next several months," he said.
The Housing Industry Association has gone a step further, by urging banks to move in spite of the rate hold. HIA chief economist Harley Dale said the economy remained a mixed bag, with evidence of housing recovery "far from compelling". He urged banks to trim rates to provide a boost to the sector.
"Financial institutions could themselves assist domestic economic prospects by providing interest rate relief they held back from businesses and households last year," he said.