While the latest board meeting of the Reserve Bank saw the cash rate drop and predictions have mounted of further falls in coming months, the head of a major mortgage broking network believes borrowers re likely to see their interest rates rise rather than fall.
“The July 2 federal election has delayed moves by the banks to increase rates independently of the RBA,” 1300HomeLoan managing director John Kolenda said
“The banks 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 this year,” Kolenda said.
Kolenda said the recent attention from both sides of politics and the federal Opposition pledge to hold a Royal Commission into Australia’s banking system has also tied the banks hands on rates until after the election.
“While the RBA has room to cut its cash rate further due to the sluggish economy and subdued consumer confidence, any future reduction is likely to be negated,” he said.
“Banks will look to increase their rates at the next opportunity, most likely in the second half of the year once the election is out of the way.”
Despite the looming spectre of rate rises, Kolenda said current conditions in the lending market mean borrowers should still be able to find a deal that favours them.
“With the recent intensified competition in the market, consumers can take advantage of some very competitive variable rates and fixed rates under 4%,” he said.
“Don’t pay more than you should as it is costing you thousands. Home loan customers should also not be relying on the RBA. It has never been more important to review your home loan regularly and seek out the best deal. A mortgage broker can assist with this process.”