Shared pain ... Every homeowner is expected to be hit by higher interest rates.
ALL home loan borrowers should brace for higher interest rates as the nation’s banks prepare to follow their recent investment loan rate increases with fresh hits on investors and owner-occupiers.
“It’s becoming clearer that customers are going to bear most of the pain, not the shareholders,” said Morningstar head of banking research David Ellis.
“I believe we will see more interest rate increases on investment and residential lending over the next six months.”
Profit grabbing ... Banks will try to raise profits by raising interest rates.
Banking regulator APRA has asked the banks to put the brakes on investment loan growth and ordered them to set aside more cash in their balance sheets by mid-2016, which will increase their costs.
“This is just the first response by the major banks exerting their market power under the guise of APRA’s request that they try to slow investment lending,” said Mr Ellis, adding that the recent move should increase their profits by 2-3 per cent.
The Reserve Bank of Australia kept the official cash rate on hold this week, and experts are split about the direction of future moves. A survey of 31 economists by finder.com.au reported that one-in-five believe the RBA will cut later this year, but more than half expect a rise next year.
AMP Capital chief economist Shane Oliver said he expected an RBA cut in November and that the banks would not pass on the full cut.
“The last thing the Reserve Bank would want at this point is higher mortgage rates for owner occupiers — the economy is not strong enough yet,” he said.
“I think if the RBA does nothing, there’s a good chance owner occupiers will see their rates go up too.”
Regulation ... AMP chief economist Shane Oliver says the Reserve Bank has to step in to regulate higher interest rates.
1300HomeLoan managing director John Kolenda said people should speak with lenders and mortgage brokers to get clarity about recent changes.
“In the history of home loans, I have never seen it as confusing as what it is today. It’s a minefield,” he said.
Mr Kolenda said while variable mortgage rates for owner occupiers had not yet increased, the level of discounting had dropped and future rises were likely.
“This is just the first part of their move. It’s not just investors — owner occupiers will be picked up too.”
Stay informed ... 1300HomeLoan managing director John Kolenda (right) says it’s important to speak to lenders to get clarity about any interest rate rises.
However, BetaShares chief economist David Bassanese said he did not believe owner-occupiers should fear a rate rise, because regulators were focused on investors, which might be hit again in the coming months.
“Lending to investors is still growing more strongly than the Reserve Bank would like, but I don’t see it happening to owner-occupiers,” he said.