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Future cash rate cuts by the Reserve Bank are likely to be negated by lenders who raise interest rates, according to 1300HomeLoan managing director John Kolenda.
The RBA announced yesterday at its monthly board meeting that the official cash rate would remain at a record-low two per cent, where it has been since May.
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Mr Kolenda said that despite the RBA keeping the cash rate on hold, thousands of borrowers have had their interest rates go up by as much as 49 basis points.
“These recent months have been confusing times for borrowers with banks lifting rates outside of the RBA’s deliberations, and we will see this continue in the months ahead,” he said.
Mr Kolenda said expectations of a reduction to the cash rate before the end of the year – possibly on Melbourne Cup Day – remain, but further rate relief may not be passed on in full by lenders, while some borrowers have been hit with increases to their mortgage rates.
“The decision of many lenders to raise interest rates for investment and interest-only loans as well as revised borrowing conditions has already had an impact on many borrowers with more expected,” he said.
“We are likely to see increases from 25 to 50 basis points in out-of-cycle movements by many banks as they adjust their pricing to accommodate additional costs. They face a balancing act between managing home loan growth and shareholder returns.”
Over the next six to nine months, Mr Kolenda said we may see increases in rates across the board with the pressure on the major banks to meet APRA’s measures by June next year.
“This will likely see rates increase for owner-occupied in the future,” he said.
[Related: Cash rate losing relevance, says Kolenda]
