Borrowers to face higher interest rates regardless of RBA moves

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While speculation mounts the Reserve Bank of Australia (RBA) will announce a further cut to the official cash rate in coming months, borrowers have been warned their mortgages could soon come with higher interest rates.

At this week’s board meeting the RBA left the cash rate on hold at 1.75%, but many commentators believe the central bank may reduce the rate again in August following the release of updated inflation figures.

“If the June quarter inflation data, which is out a week before the RBA’s August board meeting, provides another weak reading, the chances of a rate cut in August are high,” CoreLogic research head Tim Lawless said following the RBA’s decision this week.  

The last cut to the cash rate came in May and while many lenders passed some, if not all of that reduction on to borrowers, John Kolenda, head of mortgage broking network 1300HomeLoan, said consumers shouldn’t expect similar relief in the future.

“The banks have been waiting until the election is out of the way before making any moves independently of the RBA,” Kolenda said.

“They want to lift rates in response to rising funding costs and the additional costs they face for the extra compliance and regulatory increase on reserves they will have to have in place by the end of June,” he said.

“While the RBA has room to cut its cash rate further due to the two speed economy and subdued consumer confidence, any future reduction is likely to be negated.”

But while Kolenda believe interests rates will go up, some borrowers have already been granted a reprieve. 

The Commonwealth Bank recently announced a reduction in interest rates for investor and owner occupier borrowers, while non-major lender ME has also recently announced a range of cuts

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