"Long odds" against RBA rate move

by Rebecca Pike05 Jun 2018

The Reserve Bank of Australia (RBA) is due to make a decision today on the cash rate.

The rate has stayed at a record low of 1.5% since August 2016 and experts are predicting it will not change soon.

The RBA has said its next move would be a hike, but the predictions from two months ago that it would be this year have now changed to suggest it will be some time later in 2019.

Despite the reserve bank keeping the rate still, data at Canstar shows more than 50 lenders have moved their rates since January.

Steve Mickenbecker, group executive, financial services, said, “There are very long odds against a move in the Reserve Bank cash rate this June.  Wage growth has stayed stubbornly flat and until wages move up, the RBA will be concerned about passing on a virulent strain of mortgage stress this winter.

“The RBA is unlikely to make a move just as the US declared trade wars have introduced a threat to the green shoots of recovery around the globe. 

“While the RBA stands still, our research shows over 50 lenders have moved rates since January. Rates displayed on Canstar now start at 3.39%, and with over 4,000 home loans listed there is plenty of choice for borrowers.”

Ninety-eight percent of brokers at HashChing also believe the rate will remain on hold this month, which is up from 90% last month.

Thirty-six percent of brokers surveyed said they expected the rate to go up by the end of the year.

Siobhan Hayden, COO of HashChing, said, “Borrowers will need the assistance of experienced mortgage brokers now more than ever for their home loan applications, but there will also be greater pressure on brokers to meet the stricter requirements being enforced by banks.

“Technology platforms like HashChing allow brokers to automatically capture customers’ income and expenses and capture all supporting loan documents, which will be critical now in the current lending landscape if brokers wish to remain competitive.

“It’s also clear that there is a growing sentiment amongst brokers that interest rates will rise by the end of the year. This view, which has been echoed by many economists and industry commentators, has resulted in a growing proportion of borrowers making enquiries about fixed rate mortgages.”

Thirty-five percent of brokers said they had seen an increase in customers asking about fixed rate mortgages.

The RBA decision is expected at around 2.30pm this afternoon.

 

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