Variable rate cuts will not last long, says mortgage veteran

by Julia Corderoy10 Aug 2016
Consumers and brokers should not expect the recent variable rate cuts to last for long, a mortgage industry veteran has cautioned.

1300 HomeLoan managing director John Kolenda said the market should expect the major banks to increasingly adjust their interest rates despite the latest cash rate cut spurring on the recent variable rate frenzy.

“This might continue for a little while but I would expect many of them to reprice sometime this year as the current margins are unsustainable with the additional costs banks are facing along with the pressures of return on equity for their shareholders,” Kolenda said.

According to Kolenda, the central bank is “rapidly” losing economic influence with out of cycle interest rate movements and increasing impacts on inflation. 

“Gone are the days when the RBA’s official interest rates and the banks move together as we have seen with a host of out of cycle rate movements in recent times,” he said.

“Today interest rate movements and inflation are influenced by domestic, international and regulatory forces and the RBA is becoming redundant.

“Rather than seeing our broader market move positively at once, we now see segments of improvements and others which remain patchy. Nothing works in sync anymore. Many more influences are coming into play, which makes it hard for the RBA to play a significant role.”

However, Kolenda said consumers can at least count on interest rates to stay low for the foreseeable future in the continually challenging economic climate.
 

COMMENTS

  • by Scott Beattie 10/08/2016 9:14:57 AM

    From what I recall, rates are back to where they were late last year before APRA in effect forced a rate rise with the investment lending and required capital.

  • by CashMoney 17/08/2016 4:23:08 PM

    Now is definitely a good time to fix atleast a substantial portion of your lending on 3 to 5 year terms.
    While the variable rate is not going to stay low for long they are not going to increase much over the next 2 years. Very hard to see growth putting pressure on inflation.