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Most brokers believe the 27 basis point spread between the majors’ standard variable rates will remain unchanged until the Reserve Bank meets again in February.
Results from the latest Mortgage Business straw poll showed almost 76 per cent of brokers thought the majors would await the Reserve Bank’s decision in February before making any changes to standard variable rates.
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Of the 358 respondents, just 19.3 per cent of brokers said the majors would narrow the spread between the standard variable rates before February, while 5 per cent said they were unsure what the majors would do.
Citibank head of distribution and marketing Peter Hayward said while the banks would more than likely wait to see what the Reserve Bank does in February, it is difficult to predict how the majors will react once the time has come because interest rates are synonymous with bank funding levels and not all banks have the same funding source.
“Every bank has its own methodology for funding. As a result, funding costs are quite disparate. A bank’s funding is locked in for a defined period, after which it revises its funding methodology,” Mr Hayward told Mortgage Business.
“When a bank’s funding is replaced by higher funding, that has a direct impact on standard variable interest rates,” he said.
Intelligent Finance managing director Justin Doobov said while banks would probably not move before February, he expects to see large rate movement over the next three to four months.
“In the last five years, the interest rate spread between the majors was negligible. The global financial crisis threw the lending market into turmoil and as a result, we now see a significant rates spread between the big four banks,” Mr Doobov said.
“However, I expect that the banks will fall back into line with each other in the coming months.”
Mr Doobov said borrowers should not be overly concerned by the current disparity in interest rates.
“We warn our clients not to select a loan solely based on current interest rates, as they are likely to change. Instead, we recommend they consider a number of factors and then decide on the loan that is most appropriate for them.”
