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Is A Rate Rise On The Way From The Banks?

06.04.16 | Marc Barlow | Reserve Bank Announcements

Australia’s big banks could be eyeing off an interest rate increase soon according to a respected figure in the local brokerage industry.

Mr Peter White, who acts in the position of Chief Executive Officer at the Finance Brokers Association of Australia Limited (FBAA), believes various factors are coming together which could lead to the major’s making a decision to act in an upward direction..

An increase in interest rates may occur in the upcoming months and continue on for at least the next 12 months depending on economic and market conditions according to Mr White.

Mr White also points to wholesale funding costs, ongoing pressure on the banks profit margins and the potential for regulatory changes as indicators that a change may well be on its way.

The Aussie Dollar

Adding fuel to the fire the Australian dollar is currently enjoying something of a rebound from January’s lows and the Reserve Bank of Australia’s decision on Tuesday to keep the official rate on hold is hardly going to slow down its momentum in the short term.

The Aussie dollars performance in relation to the banking sector has a flow effect to what rates are set at and along with increased compliance costs it is another factor which could force the banks to make a move.

What Should Mortgage Holders And Their Brokers Do?

With an increase in lending rates looking likely mortgage holders should be aware of their financial obligations and pay close attention to how they will be affected should an increase rate rise come from the banking sector.

If a number of increases to the variable rate do occur home loan holders may need to consider shifting part or all of their mortgage obligations to a fixed rate scenario.

For their part brokers need to pay close attention to the situation and to offer ongoing advice and support wherever is appropriate, and to continue to strive to ensure that their customers get the very best financial outcomes.