Rate rises to wait until after election

by John Maguire21 Apr 2016
Australia’s major banks are likely to wait until the aftermath of the federal election before introducing new rate rises that are out of cycle with the Reserve Bank of Australia (RBA) keeping the cash rate on hold.

With a double-dissolution election all but confirmed for July 2, Morgan Stanley analysts have said there is a “high probability” that lenders will increase rates for borrowers following the election in the wake of cost pressures. Banks are likely to delay the rate hikes until after the election so as to avoid the ire of a government campaigning for re-election.

Morgan Stanley’s note to investors said, “Despite the near-term pressures, we expect the timing of future re-pricing initiatives for the major banks to be delayed until after the federal election.”

Commenting on the seemingly inevitabe rate rises, Otto Dargan, managing director of specialist mortgage broker firm Home Loan Experts, told Australian Broker, “There's definitely increased cost pressures, particularly due to increased compliance costs and higher capital requirements. So while we never like to see rates go up, it is justified."

He added that mortgage brokers should see Morgan Stanley’s forecast as an opportunity to prepare clients ahead of the fact.

"It's an opportunity for mortgage brokers so get ready to communicate to your existing clients,” he said. “If you don't, then someone else's marketing will."

It is estimated that 20 banks have increased rates on certain products over the past month, including home loans, despite the RBA's cash rate being on hold.