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Market uncertainty over whether the RBA will increase interest rates or pause for a month is also being reflected in the mortgage broker space, with two leading brokers diverging in their predictions.
Market commentary, indicators and predictions around the RBA’s April 4 decision have been split down the middle, with money markets suggesting a hold while many economists still predict rates will rise.
The AFR reported that money market traders are giving about a one in 10 chance of rates rising for the eleventh consecutive time, while economists such as Catherine Birch at ANZ are still tipping a rise.
Rising expectations of a cash rate hold at 3.6% are due to concerns over bank trouble in the US and Europe and inflation dropping to 6.8% in February from a peak of 8.4% in the December quarter.
Brokers too have different expectations, with Aqua Financial Services principal Daniel Hustwaite (pictured above left) predicting a hold in April, while Universal Mortgage Experts owner Nathan Aird (pictured above right) expects a rise.
“Based on the most recent inflation figures and general market reporting from this week we believe the RBA will most likely hold off on a further rate increase in April,” Hustwaite said.
The full effect of rate increases took approximately six months to flow through to the economy, Hustwaite said, so he believed the lagging effects or past increases were yet to be fully felt.
“With the amount of consecutive rate increases that have occurred since early 2022, we do not believe it is a good idea to continue raising rates at this point,” Hustwaite added.
Aird said he expected the RBA would pass on one more increase in April, in order to cement the downturn in inflation that it had been targeting all along.
“I think we will see the one more increase in April, before a pause,” Aird said. “But I think with one more in April, it will be two to three too many, which is why they will start to drop before the end of the year.”
Both brokers say they will continue to proactively service customers regardless of the RBA rate decision.
“Most of our customers have managed to handle the rate increases quite well so far as they have had measures like saving buffers built up,” Hustwaite said. “That said, we are proactively managing our portfolio and assisting customers with regularly reviewing their lending and asking their banks for better rates, etcetera.”
Aird said he had been managing customers by achieving “rate reductions across the board”.
“Thankfully, lenders’ retention teams have been very aggressive, and we have dropped most customers variable rates by over 1% since the start of this increase cycle, meaning we have no one in hardship,” he said.
Aird said he expected that following the April decision, Universal Mortgage Experts would be doing more of the same.
“I have a dedicated pricing team working through the database to reprice - or rewrite if appropriate - to ensure we keep their rate as low as it can be during this cycle.
“I am educating new and existing customers on the ‘whys’ of this rate cycle and helping them with managing their current and future debt levels and required repayments.”
Hustwaite said that, while there were challenges in the market currently, it was also creating opportunities for Aqua Financial Services as a brokerage business.
“Specifically, with the large portion of mortgages due to roll off fixed rates this year we believe there will be significantly increased activity in the refinance space which should be sufficient to offset any decrease in the new purchase space,” he said.
“It is about being vigilant as a broker business to ensure our clients are being serviced in a way that ensures we assist them during what is essentially a challenging time compared to the same time last year due to the rate rises.”
Do you think the RBA should hold interest rates in April or increase them again? Share your thoughts on this topic in the comments section below.
