Rate cuts unlikely to last, says broker head

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While numerous lenders have announced rate cuts of some size following this week’s cash rate decision by the Reserve Bank of Australia (RBA), borrowers have been warned they may not last.
After the RBA cut the cash rate by 0.25% to 1.5% on Tuesday, lenders passed on varying proportions of the cut, but the head of a major mortgage broking network believes they are likely to move without direction from the central bank as the year goes on.
 “This might continue for a little while but I would expect many of them to reprice sometime this year as the current margins are unsustainable with the additional costs banks are facing along with the pressures of return on equity for their shareholders,” 1300HomeLoan managing director John Kolenda said.
Though this month’s move by the RBA did result in some rate cuts by lenders, Kolenda believes the market is moving to a position where the RBA’s monthly decisions are increasingly irrelevant.
“Consumers are far more sensitive and reactive when official interest rates go up and they have not necessarily responded when rates have been dropped by the RBA to stimulate the economy,” he said.
“Gone are the days when the RBA's official interest rates and the banks move together as we have seen with a host of out of cycle rate movements in recent time.”
Kolenda believes a similar situation is also playing out in the wider economy, as a range of different factors become more influential than the central bank.
“Today interest rate movements and inflation are influenced by domestic, international and regulatory forces and the RBA is becoming redundant.
“Rather than seeing our broader market move positively at once, we now see segments of improvements and others which remain patchy. Nothing works in sync anymore. Many more influences are coming into play, which makes it hard for the RBA to play a significant role."

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