Last week was one of the most active that brokers can remember, with rates chopping and changing across the Big Four.
The channel saw lenders hiking fixed rates across the board, slashing variable rates, then hiking again, then slashing again.
Since the RBA cash rate decision on Melbourne Cup Day, there have been historic fixed rate movements at all of the Big Four banks, with 50 points added at CBA and NAB, 40 at ANZ and 21 points at Westpac.
At the same time, ANZ took 43 points off their variable rate and Westpac took 10 off theirs. It was enough to make brokers sit back and wonder about the last time that they had seen such uncertainty in the market.
“I don’t think it’s as high as when Covid hit,” said Mark Rogan, 20-year industry veteran and mortgage broker at TrueSavings. “Everyone thought, with the threats to jobs, that lending was going to really slow down.”
“In fact, the opposite happened. People kept their jobs, fixed rates dropped dramatically and people went for it. They go pre-approvals and realised they could borrow more.”
“It’s close to being the highest in terms of uncertainty in terms of people seeing rates rise quickly and they don’t know when that’s going to stop. Especially when they see CBA raise twice in three weeks, and other banks following suit.”
“That’s uncertainty around where things will move. There’s people out there with preapprovals, hoping to lock in a fixed rate, that are now going to miss out because they can’t find a property.”
“There’s uncertainty about where things are going to go, and what it’s going to do to the market – I wish I had a crystal ball.”
The background to the uncertainty is the RBA cash rate: while it remains historically low, lenders are now unsure of how long that will continue.
“The RBA came out and said that they weren’t going to put up the cash rate until 2024, and nobody believes them anymore,” said Rogan. “They also came out and said that they were going to taper their bond buying from $5bn to $4bn.”
“I think the banks, having seen the bounce back from the first lockdown, are expecting something similar if not bigger. They’re expecting that, on the back of that, the easing will happen more quickly, which in itself puts pressure on rates.”
“The cost of funds is increasing and that’s why fixed rates are moving so quickly. Interestingly, a lot of the banks are decreasing their variable rates: some on an LVR basis, which has seen the sub-70s go down, and others on all.”
The Big Four uncertainty, in the short term at least, might well create opportunities for second tier lenders and non-banks, who can operate at the margins and be more agile.
“Banks are emailing us and telling us about the pressure,” said Rogan. “They’re telling us that they don’t know how much longer they can keep fixed rates low.”
“Historically, fixed rates has been 20% and variable has been 80%: I’ve been doing this for 19 years and I’ve never seen fixed rates so high. Customers tended to avoid them because of issues like break costs.”
“I think they’re trading so well because a lot of the rate reductions in the variable market weren’t passed on. Where they’ve been prepared to give something was in the fixed rate market, because the RBA was pushing those rates down. If you lock someone into a fixed rate, they’re not going to go, so banks used it to buy market share.”
“There’s always people out there who are opportunistic and will possibly take advantage of this, but I don’t know how long they’ll be able to do it for. It depends if they’re under system. If they’ve been under system in fixed they’ll have something to hold onto that they can pass on.”
