Rate rise coming, despite election delay

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The spectre of a looming Federal Election could bring some relief for Australian borrowers, with it predicted that lenders will wait until after the Australia has gone to the polls before announcing the next round of interest rate rises.

According to a report by Your Investment Property Magazine’s sister publication Australian Broker, analysts at wealth management firm Morgan Stanley this week predicted in a research note to clients that there is a “high probability” that lenders will increase rates for borrowers following the election in the wake of cost pressures.

Banks are likely to delay the rate hikes until after the election so as to avoid the ire of a government campaigning for re-election.

“Despite the near-term pressures, we expect the timing of future re-pricing initiatives for the major banks to be delayed until after the federal election,” the research note.

Speaking to Australian Broker, Otto Dargan, managing director of specialist mortgage broker firm Home Loan Experts, told Australian Broker that while lenders may hold off on rate rises for the time being, any increases are justified.

“There's definitely increased cost pressures, particularly due to increased compliance costs and higher capital requirements,” Dargan told Australian Broker.

“So while we never like to see rates go up, it is justified,” Dargan said.

Whether the increase is justified or not, the delay in any rate rise is likely to be welcomed by borrowers as it they given some time before they need to worry about the next change in a lending market that has been described as a minefield.

“Home owners have to tip toe through a mortgage minefield at the moment and it's only expected to get even more confusing. Interest rates are being raised independently of the RBA's deliberations while we also have a range of home loan products with some of the biggest price differentiations in memory,” John Kolenda, head of mortgage broking network 1300HomeLoan, said earlier this week.

Confused mortgage holders must be struggling to keep on top of all the changes. But they also can't afford to adopt a set and forget mentality with their home loan as it could cost them thousands of dollars,” Kolenda said

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