Don’t let the Reserve Bank’s inactivity fool you. Interest rates are actually rising.
That might seem strange. After all, the Reserve Bank has left the official cash rate at a record-low 1.50 per cent since August 2016. The last increase came way back in November 2010 – and some economists believe the next one might not occur until 2019 or even 2020.
So what gives?
Well, even though the Reserve Bank has been sitting on its hands, many Australian lenders have been taking action. Their funding costs have been rising; after sucking it up for a while, they’ve recently decided to pass on those extra costs to us in the form of higher mortgage rates.
Macquarie Bank, ING, Bendigo Bank, Bank of Queensland, Suncorp Bank, Citibank, AMP Bank, Auswide, ME Bank, Auswide and Pepper are some of the lenders that have lifted rates. “Funding costs have significantly risen since February this year,” Bank of Queensland explained when announcing its decision.
The big four haven’t raised rates – yet
Don’t feel bad if you haven’t heard about these rate rises – because, so far, the big four banks haven’t joined the party.
If and when that happens, it will really become big news.
Why haven’t ANZ, Commonwealth Bank, NAB and Westpac lifted rates? Probably because of the Royal Commission, which has exposed years of unscrupulous lending practices. The big banks are now trying hard to convince everyone that they’re no longer greedy, so the last thing they want is to inflame public opinion by making out-of-cycle rate hikes.
How will you respond to rising rates?
Unfortunately, when banks lift interest rates, agents often feel the consequences.
Mortgages are like most products – as prices go up, demand goes down. Also, they become harder for borrowers to qualify for.
So even though interest rates are low by historical standards, don’t be surprised if an increase in rates leads to a decrease of traffic at your open homes.
Smart agents should be thinking of ways to adapt to this changing environment.
One possibility might be to tell your pipeline vendors about all these rate rises. You might explain that if rates go up and buyer activity goes down, they might regret any delay in selling.
Another possibility might be to build a strong referral relationship with one or two trusted mortgage brokers. If your buyers are finding it harder to get finance, expert advice could be just what they need to get them over the line.