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The Reserve Bank’s decision to raise the cash rate was a “disappointing” one, as mortgage association heads weigh in on the move.
The Reserve Bank of Australia moved to lift the cash rate from 3.60 per cent to 3.85 per cent during the May meeting in a move that shocked economists as predictions for a further hold were widely expected.
The Finance Brokers Association of Australia’s (FBAA) managing director Peter White AM said it was “disappointing to see yet another interest rate rise”.
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“This is another hit for Australians,” Mr White said.
“The RBA gives inflation as the key reason for its decision and while I understand this, I suggest that the economic fallout of higher interest rates and rents, along with the cost to the community from increased social and mental health issues, may outweigh the benefits of today’s rise towards trying to lower inflation.”
He flagged the FBAA's recent Australian mortgage and rental affordability survey, conducted by research firm McCrindle, which revealed mortgagors are being forced to sell assets, take on additional work, cancel holidays, cut back on grocery and social activity spending, withdraw savings, and move to cheaper rental properties (in the case of renters).
Of the 1,074 Australians (aged between 18–77) surveyed, 83 per cent said the rising interest rates and rental prices were putting pressure on their financial position, compared to 75 per cent (in November 2021) who believed rising interest rates ‘would’ impact their financial position.
As such, Mr White has urged the banks to “do the right thing” and forego increasing rates outside of increases in the costs of funds.
National Australia Bank (NAB) has already announced it will pass on the new rates, lifting its variable home loan interest rate by 0.25 per cent per annum, effective as of 12 May 2023.
“Australians have a right to question how our monetary policy has been managed,” Mr White added.
“Governments and lenders and presumably the RBA could read the global economic indicators well before the first rate rise in May 2022 yet all failed to prepare Australians.
“Rates could have been raised in smaller increments over a longer period of time, putting far less pressure on borrowers and allowing them to plan.”
A timely reminder to speak to a broker: MFAA
Meanwhile, the chief executive of the Mortgage and Finance Association of Australia (MFAA), Anja Pannek, commented that while the rate hike was unexpected by financial markets, it highlighted the “RBA remains focused on taming inflation”.
“We know MFAA members are well placed to guide their clients through a complex and competitive borrowing market,” Ms Pannek said.
“This rate rise again serves as a timely reminder that all borrowers — mortgage holders and small-business borrowers — should be speaking to a mortgage and finance broker to ensure they are getting a good deal in the current lending environment.”
Speaking in an interview with Sky News Australia on 1 May 2023, Ms Pannek stated the rate decision would benefit Australians taking out new loans or looking to refinance.
Ms Pannek further stated as 880,000 borrowers are set to come off fixed-rate mortgages, a lot of competition will be added to the market.
“We are in an environment where there is absolutely all-time record competition and I think this really plays into the hands of consumers as well,” Ms Pannek said.
[RELATED: Mortgage holders are ‘on the brink’, FBAA warns]
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