Morning Briefing: Industry responds to cash rate held; major banks hike rates

The divergence between Reserve Bank and bank movements could cause added confusion for mortgage holders ... Major banks hike rates...

Industry responds to cash rate held
The Reserve Bank announced yesterday it has kept the cash rate at 1.5%. 

CoreLogic’s head of research Tim Lawless commented on the Reserve Bank’s decision to hold, “despite inflation tracking well below the target range of 2-3%”.

“In balance, there are plenty of reasons why the RBA would keep rates on hold such as the rebound in housing market strength and housing investment activity, a surge in commodity prices, and potentially a lower Australian dollar as the US looks to increase interest rates.”  

LJ Hooker CEO Grant Harrod said the decision of major lenders, including Westpac and St George, to lift their variable lending rates in the lead-up to the meeting should re-enforce to home owners of the independence of the banks.

“The next official cash rate movement will be up, but the RBA is unlikely to consider that until March. But as we’ve seen with some major lenders this week, the banks have the full capability to adjust their own lending policies, and we’ll likely see more of that in 2017.”  

1300HomeLoan managing director John Kolenda said it was no surprise to see the cash rate remain the same but that changing interest rates among the banks could cause greater confusion for consumers. 

“Rates are moving outside any decisions being made by the RBA as lenders are exposed to global markets and cost of funds,” he said.

“In the future we will likely see more varied pricing across different products and risk categories. Products like investor loans, higher loan to valuations ratios (LVR) and interest only loans will see higher interest rates versus the traditional home loans under 80 per cent LVR.

“There will be greater confusion for customers and that means a greater need to use a mortgage broker as rate movements across different products will see large variations across lenders. Finding the right product at the right price will be very challenging.”

Major banks hike rates 
National Australia Bank (NAB) and Westpac Banking Corporation recently increased rates on their residential investor home loans and interest-only home loans, respectively.
 
NAB’s increased its variable rate for new and existing residential investor home loans by 0.15% to 5.55%.
 
The bank will also raise the variable rate for NAB Homeplus Residential Investment Home Loans, available through NAB Broker, by 0.15% p.a., to 5.58% p.a., effective 12 December 2016.
 
Westpac is also raising its standard variable rate by 8 basis points on interest-only home and investment loans, effective 16 December.