Top brokers unsure of bank rate cut reaction

by Mackenzie McCarty02 May 2012

Leading mortgage brokers have expressed uncertainty as to how much of the RBA's 50 basis point cash rate reduction will be passed on to consumers, and expect banks to 'duck and weave'.

Intelligent Finance's Justin Doobov said that the 50 basis point cut, which reduced the cash rate to 3.75% yesterday, was designed to ensure lenders pass on at least 25 basis points to customers.

He said he is expecting a variable rate reduction of at least 35 basis points, but is hoping for more than 40 basis points. He expects fixed rates could drop another 20 basis points.

Jeremy Fisher from 1st Street Home Loans said he is expecting the banks to pass on the majority of the rate reduction on their standard variable rate, but said fixed rates may not move in correlation.

Doobov said the larger lenders would be playing cat-and-mouse before pledging reductions.

"I think the larger lenders will duck and weave to not be the first lender to make an announcement as they don't want to move too much or too little," he said.

Doobov said he had already received many emails from clients hoping for the full rate cut to be passed through, though he said they know that this is "hopeful but unlikely".

Fisher likewise said clients who are getting close to settling on their loans are anxious to see if they will be given some further relief in repayments.

Both brokers applauded the Reserve Bank for injecting confidence into the housing market.

"The rate cut will help provide some confidence in the housing market which was long overdue," Fisher said.

"A for business and the mortgage market in general, this may provide a good boost in activity leading in to the winter months," he added.

"I think it is a confidence boost for buyers that money is cheaper and the numbers are starting to add up on the properties they were looking to invest in," Doobov said.

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RBA shocks with 50bp cut





  • by Country Broker 2/05/2012 12:15:49 PM

    This is all speculation , The Majors will wait and see what their so called "cost of funds" is after this cut before any announcments . The BOQ maybe have set it who knows , all smake and mirrors at present!

  • by Russell Murphy 2/05/2012 12:17:52 PM

    The 0.50% reduction to 3.75% marks a “low-point” since March 2010 & needs little interpretation; it’s all about stimulus & confidence. The past two feebel rate cuts have done little for confidence and instead a wary public has paid off its credit cards, car loans and mortgages. The flow on to the wider economy has been poor. So whilst yesterdays stimulatory intent can’t be faulted, unless Canberra can engender economic confidence I suspect more of the same public caution. That’s borne out by the yield curve that today predicts a cash rate sub-3% within 2 years. I dont think mortgage holders are yet rubbing their hands in glee but anyone with a savings account should probably start despairing now. So this jumbo rate cut is designed to have a far bigger impact than its predecessors, but if not the RBA is sure to cut again & the next RBA Board meeting is on June 5 2012.
    I'll stay tuned.

  • by john paisley 2/05/2012 12:18:42 PM

    ING bank dropped their 12 month term deposit rate by 50 basic point on monday, I wonder what they will do to the lending rate?