A top economist claims the prudential regulator has “opened the door” for banks to hike rates out-of-cycle for their own commercial interests under the guise of macroprudential measures.
Domain Group senior economist Andrew Wilson believes that even if the Reserve Bank cuts the cash rate in 2016, banks will continue lifting their mortgage rates.
“We are getting into this environment of a disconnect between mortgage rates and official interest rates,” Mr Wilson said.
“There has been a little bit of a Mexican standoff between the banks and the Reserve Bank.
“I think we’ve still got the prospect of rate rises from the banks through to July next year when they have to consolidate their new loan book capital backing.”
Regardless of how the RBA acts, it may not have any impact on mortgage rates, Mr Wilson said, adding that there will still be upward pressure on mortgage rates next year.
“We know that APRA have told the banks that they can’t grow their investor loan books by more than 10 per cent annually,” he said. “I’m not so sure that that has ended either.
“It is as though APRA has opened the door for the banks to act in their own commercial interests under the cover of these macroprudential policies.”
Mr Wilson said housing markets will continue to flatten as a result of rising mortgage rates.
“I wouldn’t be surprised if we saw interest rates increasing again as they did in October,” he said.
“We saw the auction markets fall away as a result of that, which is a confidence thing.”
The Domain Group senior economist has openly criticised the prudential regulator’s decision to clamp down on investor lending.
Last month, Mr Wilson questioned APRA’s actions in light of the Reserve Bank’s recent shock over a $50 billion home loan error.
In September, Mr Wilson told Mortgage Business that APRA’s claims of an overheating market have not yet been proven and that the motives behind its decision to curb investor credit growth require greater scrutiny.