A mortgage group is warning that tightened lending could be here to stay after the Reserve Bank of Australia chose to hold the cash rate for a 26th consecutive month.
According to chief executive officer of Mortgage Choice, Susan Mitchell, a combination of economic factors both domestically and abroad may be supporting the RBA’s current stance on monetary policy.
Pointing to recent reports on consumer mood, business confidence and the unemployment rate, Mitchell said it “paints a rosy picture for the state of the Australia economy”.
However she said there are a number of factors meaning lenders are having to increase interest rates, including what the American economy is doing.
She said, “The Fed’s decision to continue to raise rates could have implications on the Australian economy such as export and trade, the value of the Australian dollar and perhaps the most notable from a housing perspective, an increase in wholesale funding costs.
“Rising wholesale funding costs have already resulted in Australian lenders raising the interest rates charged on their variable home loan products in recent months, and with the market predicting another rate rise from the Fed in December, Australian interest rates could rise further.”
Mitchell also said factors such as the Royal Commission could have a continued effect on the tightening of lending.
She added, “The Royal Commission Interim Report released last week provided solid insights into the financial services industry ahead of its final report in February next year. While it may be too soon to speculate on the outcomes of the commission, I believe the new heightened level of scrutiny around lending will remain in place for some time to come.
“These factors combined could put further upwards pressure on home loan interest rates. This, coupled with an increasingly complex loan application process means it has never been more important for prospective buyers and borrowers alike to ensure they are in a financially healthy position and highlights the need for expert advice when applying for a home loan.
“A qualified mortgage broker is across the ever-evolving lending landscape. A broker will assess a potential borrower’s financial situation in order to determine how they can be in the best financial shape prior to submitting a loan application, and if necessary, coach them through any changes they could make in the short and medium term to ensure a seamless application process when they are ready to buy.”
