Powered by MOMENTUM MEDIA
realestatebusiness logo

Subscribe to our newsletter

Global challenges could mean lower interest rates: Kolenda

Subdued global economic growth could have a major influence on the Reserve Bank’s December cash rate decision, according to 1300HomeLoan managing director John Kolenda.

In particular, Mr Kolenda said the slowdown in China and the rest of Asia remains the big concern for the RBA and a strong argument for cutting rates next month and into 2016.

“There are other reasons for the RBA to reduce the cash rate from its current record low of 2.0 per cent in the months ahead,” he said.

“Mortgage holders have already seen their interest rates go up in recent times as the major banks and other lenders have been increasing variable interest rates from 15 to 49 basis points due to additional compliance and provisioning costs.

“The Sydney and Melbourne property markets – the only cause for concern domestically for the RBA to consider actually lifting its cash rate – are slowing and are now no longer a reason to keep rates on hold.”

Advertisement
Advertisement

Mr Kolenda said continued falls for the Australian dollar, weak commodity prices and subdued consumer confidence and business investment would also weigh on the RBA as it ponders lowering the cash rate for the first time since May.

“Of course, if the RBA does reduce its cash rate going forward, it remains to be seen how much of the RBA’s rate reduction is passed on by lenders,” he said.

Mr Kolenda said the RBA’s future cash rate decisions could be negated by the banks adhering to APRA’s regulatory requirements that will increase the cost of providing mortgages and make them the strongest in the world.

“Further rate relief from the central bank may also not be passed on in full by lenders, and we may see increases in rates across the board due to potentially increased funding costs and pressure on the major banks to meet the APRA requirements by mid-2016.”

Global challenges could mean lower interest rates: Kolenda
>In particular, Mr Kolenda said the slowdown in China and the rest of Asia remains the big concern for the RBA and a strong argument for cutting rates next month and into 2016.

“There are other reasons for the RBA to reduce the cash rate from its current record low of 2.0 per cent in the months ahead,” he said.

“Mortgage holders have already seen their interest rates go up in recent times as the major banks and other lenders have been increasing variable interest rates from 15 to 49 basis points due to additional compliance and provisioning costs.

“The Sydney and Melbourne property markets – the only cause for concern domestically for the RBA to consider actually lifting its cash rate – are slowing and are now no longer a reason to keep rates on hold.”

Mr Kolenda said continued falls for the Australian dollar, weak commodity prices and subdued consumer confidence and business investment would also weigh on the RBA as it ponders lowering the cash rate for the first time since May.

“Of course, if the RBA does reduce its cash rate going forward, it remains to be seen how much of the RBA’s rate reduction is passed on by lenders,” he said.

Mr Kolenda said the RBA’s future cash rate decisions could be negated by the banks adhering to APRA’s regulatory requirements that will increase the cost of providing mortgages and make them the strongest in the world.

“Further rate relief from the central bank may also not be passed on in full by lenders, and we may see increases in rates across the board due to potentially increased funding costs and pressure on the major banks to meet the APRA requirements by mid-2016.”

Global challenges could mean lower interest rates: Kolenda
mortgagebusiness

Latest News

The brokerage has teamed with the fintech, for the launch of a new app that will let borrowers compare pricing and environmental impact acro...

The desire to secure a mortgage has collapsed across the country, according to a new analysis from Equifax. ...

The Reserve Bank will be closely watching how households respond to higher rates as it decides its next move, ANZ senior economists have sai...

VIEW ALL

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

What is the maximum proportion of income borrowers should use to service a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.