Experts believe banks will raise variable mortgage rates
Banks may increase variable mortgage rates to recoup COVID-19 pandemic-induced losses despite a stagnant cash rate, according to experts surveyed in the ‘Finder RBA Cash Rate Survey’.
In the survey, all 40 experts and economists expected the Reserve Bank of Australia (RBA) to hold the cash rate in September, while more than half who weighed in (57%) believed that banks would raise their variable mortgage rates despite the RBA indicating the cash rate would hold at 0.25% for some time.
Half of the respondents said banks would likely announce out-of-cycle rate hikes during the first half of 2021.
Graham Cooke, insights manager at Finder, said that prospective variable rate increases meant future homebuyers should tread cautiously.
“Banking profits have nosedived off the back of billions of dollars worth of loan deferrals, a shrinking pool of first-time buyers, low-interest rates and minimal credit growth,” Cooke said.
“This may send banks scrambling to recoup lost funds by pushing up home loan rates to absorb some of these costs, which will come at a detriment to mortgage customers.
“A flat cash rate does not mean homeowners are in the clear. We learned this during the most recent period of cash rate stagnation. While the rate held at 1.25% for 34 months starting in 2016, banks increased their variable rates seven times.”
The survey also found 88% of economists believed the nation’s other big banks would follow Westpac and ANZ with cutting or withholding dividends.
Finder’s ‘Economic Sentiment Tracker’, which gauged housing affordability, employment, wage growth, cost of living and household debt, increased from 8% in March to 24% in August.
AUTHOR
Chris Dastoor
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