Mortgage holders are on course to go a decade without experiencing an increase in official interest rates by the Reserve Bank of Australia (RBA), according to one broker network.
The RBA decided yesterday (4 November) to leave the cash rate at 1.5%, where it has stayed since August 2016. The last rate rise was from 4.5% to 4.75% in November 2010.
1300HomeLoan managing director John Kolenda said since that time there have been 12 rate reductions.
Kolenda added, “With no evidence of a significant improvement in the domestic economy, many forecasters expect the cash rate will remain on hold through 2019 and also the following year.
“That means a whole generation of mortgage holders could go an entire decade without seeing official rates rise, although they will have experienced out of cycle rate movements from lenders.”
Kolenda said there is no need for the RBA to do anything at the moment with the mortgage market constrained by uncertain household consumption, falling property prices in Sydney and Melbourne, the fallout from the Hayne Royal Commission’s final report and the looming federal election.
He added, “Borrowers face a very challenging lending environment with banks toughening their lending criteria and conducting detailed examination of borrowers’ expenses and all forms of income used to service their repayments.”
The CEO of Mortgage Choice, Susan Mitchell, also warned the lending environment could become even more complex.
She said, “This tightened lending environment, means a larger number of Australians are experiencing difficulty securing a home loan due to new, stricter assessment criteria in which their savings and living expenses are being forensically examined.
“That being said, those who present less risk are able to negotiate a more competitive home loan deal with lenders, who are competing vigorously for financially fit borrowers.
“Looking ahead, borrowers should not be complacent, as securing a home loan in 2019 may become increasingly complex. This highlights the need for borrowers to get their finances in order and seek expert advice from a qualified mortgage professional, who can guide them through the process and offer a choice of lenders.”
