The RBA cut the cash rate for the first time since the GFC on Melbourne Cup day - but what does it mean for brokers?
On today’s The Big Story, we speak with Greg Wells of Wells Partners, Lisa Montgomery from Resi Home Loans, and Ian Rakhit from Bankwest, to explore the ramifications of the cut for the mortgage market and brokers.
What will this do for consumer confidence? What will it mean for mortgage demand? And what opportunities does it give brokers?
Find out on today’s The Big Story on Australian BrokerNewsTV, your home for industry news, opinion and analysis.
Video transcript below:
Donna Sawyer, Australian Broker News TV
Donna Sawyer: Hi, I am Donna Sawyer and you are watching the Big Story on Australian Broker News TV.
The Reserve Bank of Australia cut the cash rate for the first time since the peak of the global financial crisis 2 ½ years ago and some economists are already predicting further cuts to come. It’s good news for mortgage brokers who have been crossing their fingers for a move to boost consumer confidence. Greg Wells, Director of Wells Partners, says the cut was just what the industry needed.
Greg Wells, Wells Partners
Greg Wells: Well, it’s a good thing. The inflation rates are now projected to be within the 2–3% band, so it left no reason why rates shouldn’t be cut. Also the timing is good because it will get consumers a little bit more confidence over Christmas. They might buy turkey rather than Devon and that’s going to help our retailers. So a good thing overall.
Donna Sawyer: Lisa Montgomery, CEO of Resi Homeloans says even though the Central Bank’s cut was priced in by the market, it’s likely to help ease consumer fears of rising rates and other living expenses.
Lisa Montgomery, Resi Homeloans
Lisa Montgomery: Look, I think that it’s been interesting in the last 12 months, consumers have been living in an environment whereby they have thought that interest rates were going to increase and when you cap all that with the pressure that they have been feeling with household costs like food, fuel, energy rising, what we have actually seen is an element of fear move into consumer behaviour and so with that came a cautious approach to borrowing and also to spending.
Donna Sawyer: She says an interest rate cut is good news for the mortgage market with business expected to gather pace in the new year.
Lisa Montgomery: We have been experiencing an interest rate war which it’s been called in recent times and that’s where there is a lot of competition now for the borrower dollar and that’s primarily because there has been a lot of inactivity with borrowers and so everyone is fighting for their business. So that’s probably going to continue I would expect into next year.
Donna Sawyer: While some lenders failed to pass on the RBA’s rate cut, Ian Rakhit, Head of Specialist Banking at Bankwest says it’s happy to pass on the full 25 basis points interest rate cut.
Ian Rakhit, Bankwest
Ian Rakhit: Bankwest are delighted with the interest rate drop, a 1/4 % is absolutely what we have been looking for and it’s great for consumer sentiment and we believe it will bring a lot of consumers back into the housing market.
Donna Sawyer: And while into the crystal ball is no exact science, Ian Rakhit says he expects the RBA will cut again.
Ian Rakhit: All of us are trying to predict in our crystal balls at the moment to see where rates will go in the future. I think a couple of things are interesting. One is the RBA have rarely moved just with one rate change. You will see through history particularly in the last 3 years that whenever there has been a one cut, there has been a second cut or a third cut. Equally where there has been one rise, there has been a second rise or a third rise. So RBA have tended to move the same way over a series of rate moves as opposed to one. However, we are in very uncertain times.
Donna Sawyer: Greg Wells from Wells Partners says brokers have a window of opportunity as some of the lenders move independently of the RBA.
Greg Wells: Probably an opportunity for mortgage brokers, we have already had announcements by one of the majors, that they are only passing on 20 points, rather than 25 and there is also discrimination between new clients and existing clients. This only enhances the broker proposition where consumers try and navigate these different prices and they need assistance and they are coming to the brokers to get the better more suitable deal. So that presents an opportunity for us as brokers.
Donna Sawyer: For more on interest rates and other mortgage industry news, click around the Australian Broker News website. I am Donna Sawyer and I will see you again next week with the Big Story.