Australia: Lenders move rates despite rate hold by RBA

At its June 2018 meeting, the Reserve Bank of Australia announced it would leave the cash rate fixed at 1.5%, the prevailing rate since August 2016. However, many lenders have moved their rates over the past few months. Canstar executive, Steve Mickenbecker, reported that whilst there was a mix of rate cuts and hikes, there was an upward bias for owner occupiers overall.

These rate adjustments have been in response to funding costs and competition. Added regulatory requirements caused by the Royal Commission could also lead to further out of cycle rate increases. Interest rates are the single most important factor new borrowers consider before selecting a lender.

In addition, according to RFi Group data, 49% of existing borrowers would refinance their mortgages to access a better rate. Younger borrowers, low-income households, FHBs and interest-only borrowers ranked as the most likely groups to refinance for any given rate difference.

As mortgage providers continue to adjust their rates at different levels and even different directions to one another, it is likely that many borrowers in the market, motivated by the high level of media coverage, will see this as an opportunity to refinance.

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