The major banks are unlikely to pass on the whole cut in official interest rates by the Reserve Bank of Australia (RBA) but should provide a significant cut, according to a survey by leading mortgage broker Priority Lending
Priority Lending Corporate Spokesman Paul Smith said a survey of the company’s mortgage brokers found just eight per cent believed lenders would match the RBA’s 50 basis point reduction in the cash rate.
Mr Smith said most of the 231 respondents thought banks would pass on a portion of the RBA’s reduction.
He said 51 per cent of brokers said rates could be decreased by between 31 and 45 basis points while 36 per cent believed the decrease would be between 16 and 30 basis points.
“Two per cent of brokers tipped no movement whatsoever while three per cent predicted a miserly one to 15 basis point reduction,” he said.
Mr Smith said Bank of Queensland had already set the scene by passing on only a 35 basis point decrease to its standard variable rate.
“The major banks are unlikely to pass on the full 50 bps reduction from the RBA due to the fact that the other variables influencing cost of funds, have not dropped in line with the RBA,” he said.
“However the majority of our brokers say a significant rate reduction is likely on the cards for home-owners, and that’s good news.”
Mr Smith said that the major banks will take their time deciding rate movements and he does not expect movement from the banks until the outcome of ANZ’s monthly rate meeting on May 11.
“Considering the major banks raised variable interest rates as recently as last month, it will be interesting to see such a quick reversal of interest rates.”
Survey Results:
With the RBA lowering rates by 50 bps, how do you expect the major banks to respond?
a) No movement – 2%
b) Decrease 1-15 bps – 3%
c) Decrease 16-30 bps – 36%
d) Decrease 31-45 bps – 51%
e) Decrease over 45 bps – 8%
Source: Priority Lending
