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After all of the big four announced they would not drop variable rates in line with the RBA’s Melbourne Cup day rate cut, the question now being asked is whether the cut will have a material impact on borrowers across the nation.
While smaller lenders such as Athena and homeloans.com.au have passed on the 0.15% reduction in full, major banks ANZ, Westpac, NAB and Commonwealth Bank have offered cheaper fixed rates loans while leaving interest rates unchanged on their standard variable-rate mortgage products. MPA spoke with the heads of two Top 10 Brokerages for their insights into what opportunities this could bring and whether more lenders will bring down variable rates.
Jeremy Fisher, director and founder of 1st Street Home Loans
The RBA cash rate cut came as no surprise to the director of Australia’s number one brokerage 1st Street Home Loans, Jeremy Fisher.
“It was definitely needed to help stimulate the economy.”
He says fixed rates below 2% for owner-occupier loans could be the new way forward for lenders across the market, with interest rates set to stay down for quite some time.
“I think talk of a rate rise is going to be a long way away.”
He says he will be advising clients who can afford their current commitments to keep repayments at the same level in order to pay off their loans quicker.
He also cautions against borrowers taking on greater debt as home loans become more affordable.
“It’s a conversation we have with a lot of clients around lower repayments.”
“They’ve also got to factor, if rates go up in future, will they still be able to afford it?”
Fisher says he is genuinely hopeful that major banks will start to pass on the reduction in their variable rate products; adding that the movement on fixed rates is a positive thing for borrowers.
The cash rate cut is going to bring forward a conversation around competitive rates as clients start to look for a better deal, he says, adding this will be particularly relevant for borrowers who have been financially impacted by COVID-19.
“It will probably create more activity – and that activity will be positive for both client and broker.”
Darren Little, CEO of Smartmove Professionals Mortgage Advisors
How banks will respond as an industry to the cash rate cut is the big question that Darren Little is asking. According to the CEO of Australia’s seventh top brokerage Smartmove Professionals Mortgage Advisors, the cut is a positive thing for consumers.
“It is clear that the economy needs support at the moment and it is great to see the RBA keeping an open mind around monetary policy.”
While he doesn’t think the cut will have a material effect on the positions of Smartmove’s client base, any change is welcomed.
“We have seen the RBA continue to move downwards over the past two years and this, combined with the changing bank appetite, has certainly created opportunities for customers.”
For Little, the opportunities for borrowers and brokers are clear.
“Pricing for customers is a critical element of any home loan along with product suitability and availability.”
“The competition in the home loan market is the hottest I have ever seen and this creates a wonderful opportunity for brokers to showcase this competition with customers to ensure they are well placed to take advantage of the offers available.”
“Consumer confidence in this market is key and we are certainly seeing a lot of our clients exploring options for both upgrading and refinancing and for investment properties which is exciting.”
Little remains optimist that lenders will drop rates following the RBA’s move, though perhaps not to the full 0.15%.
“With the continued increase in activity from customers the banks that can provide a competitive rate offer, along with a strong turnaround time commitment for brokers and customers, will be best placed to capitalise.”
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