Home News RBA cash rate decision likely driven by lenders independent interest rate rises

RBA cash rate decision likely driven by lenders independent interest rate rises

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Out of cycle interest rate increases by lenders likely played a major role in the decision by the Reserve Bank of Australia to leave the official cash interest rate on hold at yesterday’s board meeting according to the head of on mortgage broking firm.

John Kolenda, managing director of 1300HomeLoan, said the monthly RBA decisions are becoming less and less relevant for borrowers.

“The RBA's decisions have rapidly become redundant in the current lending environment,” Kolenda said.

“Westpac was the first to raise rates out of cycle and other lenders have followed suit with more increases likely in the months ahead,” he said.

Kolenda said any move by the RBA to cut the official cash rate would likely be of no benefit to those with a mortgage.

“Any future RBA cuts are likely to be negated by the actions of the banks which are adhering to the Australian Prudential Regulation Authority (APRA) new regularity requirements that will increase the cost of providing mortgages,” he said.

“Further rate relief from the central bank may also not be passed on in full by lenders and we may see increases in rates across the board due to potentially increased funding costs and pressure on the major banks to meet the
APRA requirements by mid-2016.”

Kolenda said it’s likely borrowers will face higher interest rates in the near future, as banks adjust to both changing economic conditions and the increased cost of providing mortgages.

“As we predicted earlier last month, we are likely to see increases of up to 50 basis points in out of cycle movements by many banks as they adjust their pricing to accommodate those additional costs,” he said.
 

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