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The managing director of a prominent Australian brokerage has warned borrowers to brace for the prospect of out-of-cycle rate increases following the federal election.
John Kolenda of 1300HomeLoan said while the Reserve Bank is expected to lower the cash rate again over the coming months, banks will also be looking to lift their mortgage rates.
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“The July 2 federal election has delayed moves by the banks to increase rates independently of the RBA,” he 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.”
Mr Kolenda said the Labor party’s 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.”
[Related: Home loan customers caught in ‘mortgage minefield’]
