Wait a minute, could RBA Governor Michele Bullock hand down a rate cut next week? Picture: Gaye Gerard
ANALYSIS
We keep hearing about more RBA rate hikes to come.
Some commentators say it’s not a matter of if they hike, but how many more times.
But somewhere, below all the noise, is the droning sound of the banks quietly going about their business.
Banks are a bit like bees in a hive, and the Queen Bee is of course the RBA. Once the Queen makes a call, the bees take action. If one lender cuts rates, a bunch of others follow suit.
When there’s an RBA hike, one bank will dip its toe in the honey by passing it on to customers, and then the others swarm on board with hikes of their own.
But unlike real bees, the banks are really all in it for themselves. They’re in competition with each other and their true queen is their shareholders.
MORE:New ‘tax’ for Aussies who split up
If you want to gauge what’s really going to happen, shut out the noise and instead pay attention to what banks actually do.
Just this week for example, we saw ANZ and Macquarie both slash interest rates on their fixed term products.
Several days later, Canstar revealed that 11 lenders had now cut their variable rates for first homebuyer loans.
Canstar data insights director Sally Tindall says to ‘watch the banks’. Picture: Tim Hunter.
These don’t sound like the actions of banks who think rates will rise again.
Canstar’s data insights director Sally Tindall said it’s important to be aware of what is happening in the lending market.
“Watching what banks do can provide useful clues about where interest rates might head next,” Ms Tindall said.
MORE:Landlord’s ‘sad’ demand, strict rules
“Banks are constantly assessing their funding costs, broader economic conditions and competitive pressures in the mortgage market. While their economists are analysing the same inflation, employment and consumer spending data as the Reserve Bank, lenders also have a unique insight into what’s happening within their own loan books.
“When it’s unclear which way the cash rate will go, banks will often sit on their hands, but at the moment we’re seeing some banks take the knife to both variable and fixed rates in a bid to entice new customers in the door.
In other words, pay attention to what banks are doing, because they know something we don’t know.
MORE:Risky home loan move to cost a million Aussies
There are always opportunities for borrowers to make sure they are getting the best possible deal, but a return of competition between lenders provides an even wider window.
“Lenders are clearly putting their best foot forward to attract new business, with 11 banks cutting at least one variable rate in the last six weeks,” Ms Tindall said.
All eyes will be on the RBA next week. Picture: Christian Gilles
“That might leave existing borrowers feeling overlooked, but it’s also a positive sign that competition is returning to the mortgage market. Those willing to shop around or negotiate with their lender may be able to unlock a better deal.”
The bank moves come as pressure is growing on the RBA to cut the cash rate when it meets next week.
Dale Gillham, chief analyst at Wealth Within pointed to rising unemployment and easing oil prices as a reason for a borrower boost.
“With households and businesses already feeling the impact of past rate hikes, the RBA risks turning a slowdown into a recession if it waits too long to cut rates,” Mr Gillham said.
“This month’s interest rate decision is shaping up as one of the easiest calls the RBA has had in years, yet the policymakers sit frozen as the economy weakens around them,” he said. “The warning signs are already here, and the cracks in the economy are becoming impossible to ignore.
Dale Gillham, chief analyst at Wealth Within.
“Higher interest rates have already crushed borrowing power, consumer confidence is fading, businesses are slowing hiring, and households are cutting spending. Proposed changes to negative gearing and capital gains tax are also weighing on investor confidence at the exact moment Australia is already struggling to build enough homes.”
“At some point, the focus must shift from fighting inflation to protecting growth because if unemployment keeps rising while productivity keeps falling, the economy won’t need another rate hike, it will need a rescue package.”
English (US) · 