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ISCOVER
Staff Reporter
The Reserve Bank’s decision to cut rates will be a litmus test for the mortgage exit fee ban, Firstfolio has claimed.
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Yesterday’s move by the Reserve Bank was the first rate movement since the exit fee ban was introduced back in July.
Firstfolio’s executive general manager for retail distribution Andrew Clouston said the rate movement will encourage lenders to see whether the ban has a material impact on borrowers refinancing with other lenders.
“Any time the RBA moves we see a spike in inquiries from existing borrowers shopping around for the best mortgage rate. Some refinance with a new lender, but many don’t after weighing up impediments such as exit fees and bank account portability,” Mr Clouston said.
“This will be the first time exit fees are not a factor at a time of interest rate change. The industry will be monitoring closely for signs that borrowers are now more willing to switch to new lenders, or are in fact still ‘sticky’ to their existing lenders,” he said.
Mr Clouston predicted the RBA’s shift to an easing stance would see a reversal of the current borrower preference for fixed-rate loans.
“A cycle of RBA tightening always triggers growth in fixed-rate loan sales and that’s definitely what we have seen in recent months, helped along by a drop in wholesale fixed-income rates. But when rates head downward, borrowers are more inclined to ride the trend and stay in variable loan products. The shift in direction signalled by the RBA today may only be temporary, but we will almost certainly see borrower sentiment turn toward variable loans as a result,” he said.
