The Reserve Bank of Australia (RBA) has again held the official cash rate at 0.25%; while some within the industry are optimistic mortgage rates will remain competitive regardless, as lenders jockey for new customers, others foresee it playing out differently.
Loan Market executive chairman Sam White is among those who expect banks to continue to “compete aggressively” for customers as the real estate market moves into the traditional selling season – “good news for Aussies”.
"A lender on our panel is already offering a sub 2% product and we could very well see others join them as they appeal to the marketplace,” he continued.
The aggregator head also emphasised the “many instances” when brokers have managed to secure rates for their clients below the advertised figures.
"Brokers have access to upwards of 60 lenders at any time and know which lenders are prepared to negotiate with quality borrowers,” White said.
“That's why over 57% of buyers choose to use a mortgage broker and, during this spring selling season, I believe we will see this figure rise again."
However, according to comparison site Finder, borrowers need to start preparing for the potentiality that variable mortgage rates will begin to increase as banks look to recoup the substantial losses they have sustained due to COVID-19.
In the group’s cash rate survey for the month, 57% of market analysts polled indicated they believe lenders will raise their rates despite the RBA making it clear the cash rate will remain motionless for some time.
Half of that group forecasted the out-of-cycle rate hikes to be executed over the first half of 2021.
“Banking profits have nosedived off the back of billions of dollars worth of loan deferrals, a shrinking pool of first-time buyers, low-interest rates and minimal credit growth,” explained Graham Cooke, insights manager at Finder.
“This may send banks scrambling to recoup lost funds by pushing up home loan rates to absorb some of these costs, which will come at a detriment to mortgage customers.
“A flat cash rate does not mean homeowners are in the clear.”
Cooke pointed to the most recent stretch of cash rate stagnation – when the rate held at 1.25% for 34 months starting in 2016 – to illustrate his point; over that period, banks increased their variable rates seven times.
“This means that homebuyers considering a variable mortgage should still factor in a potential repayment increase of 2-3% to their budget to prevent rate shock,” he finished.