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The broking industry has reacted to the Reserve Bank’s latest cut to the official cash rate, with stakeholders highlighting opportunities for brokers to capitalise on the expected bump in borrower demand.
The Reserve Bank of Australia (RBA) yesterday announced that it has reduced the official cash rate to a new record low of 0.75 per cent.
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The cash rate has now been slashed by a cumulative 75bps over the past five months, with the RBA also lowering rates in June and July.
Lenders have already begun to pass on the RBA’s latest cut through lower mortgage rates.
According to Aussie Home Loans CEO James Symond, the RBA's decision was partly motivated by continued weakness in some sections of the property market.
“Never before have we seen the cash rate this low. It’s a clear indication that the Reserve Bank of Australia maintains the market needs a boost," he said.
“Even after the two cuts this year, property stock remains lean and confidence has not yet fully returned to the market.
"The question now is, have we reached the bottom and will these low rates be enough to help restore confidence?”
However, Loan Market’s executive chairman, Sam White, pointed to evidence of a rebound in the property market, stating that the RBA's latest cut would further support the recovery.
Mr White said that brokers have an opportunity to capitalise on the expected pick-up in demand for housing finance by helping borrowers navigate through the complexities of the mortgage market.
“With the RBA’s move, [debt] serviceability has never been better in Australia,” Mr White said.
“At the same time, getting a home loan has never been more challenging.
“Lenders have reacted very differently to interpreting messages that have emerged from the Hayne royal commission and as a consequence, we are seeing very different outcomes for our customers.”
Mortgage Choice CEO Susan Mitchell agreed: “The cost of borrowing may be going down, however there is still a great deal of complexity in the lending environment as lenders continue to forensically examine home loan applications.
“I encourage borrowers to enlist the guidance of an experienced mortgage broker to help you put your best foot forward when you decide the time is right to submit your home loan application.
“For those borrowers who have been in the same home loan product for a while, it would be wise to speak to a broker about your situation and discover if there are other home loans better suited to your needs.”
Mr White added that with the federal government currently consulting on its proposed best interests duty, the broking industry can further demonstrate its utility to policy makers by servicing the needs of a growing customer base.
“The industry has the opportunity to show the marketplace, regulators and Canberra that it can deliver the great customer outcomes for their clients’ short, medium and long-term objectives while managing higher volumes,” He said.
Managing director of the Finance Brokers Association of Australia (FBAA) Peter White also reacted to the RBA's latest cut to the cash rate, calling on lenders to pass on the full 25bps reduction to their customers.
“Banks must immediately pass on these savings and the reduction of interest rate in full," he said.
“Banks should not be using this decrease as a mechanism to ‘buy new business’. In the past existing borrowers have waited weeks and months for any benefits whereas new borrowers are offered the new rate immediately.
"This should be passed to existing mortgage holders now.”
He added: “I’d also like to see the banks pass these interest rate reductions onto credit card holders as well as all variable rate loan facilities.”
[Related: RBA drops cash rate to new low]
