Big four banks’ mortgage rate hike fuels RBA discussion on future rate cuts

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Now that the big four banks have all lifted their mortgage rates after Westpac made the first move, it could put the onus on the RBA to again cut their official rate on Melbourne Cup day.

The RBA have been concerned for months about their interest rate cuts putting too much heat on the already firing property markets in Melbourne and Sydney.

After the big four lifted their rates in response to the crackdown from APRA to hold more capital, the RBA could be confident that another rate cut to stimulate the economy wouldn’t put so much upward pressure on house prices. 

CommSec economist Savanth Sebastian told Australian Broker Online the mortgage rate hike from the big banks would get the RBA talking about the merits of another cut.

“Yes, it certainly increases the chances of a rate cut before Christmas. If anything, the Reserve Bank will now discuss the merits of another rate cut to support growth,” Sebastian said.

“I think the move by the major banks to lift interest rates is essentially a quasi-tightening of economic conditions. The national environment still remains relatively patchy and it may be that the Reserve Bank provides a degree of stimulus in the lead up to Christmas.”

Mr Sebastian said it was 50-50 whether the RBA would cut interest rates on Melbourne Cup day.

“I think it is really going to be a line-ball decision for the Reserve Bank at the moment,” he said. 

“The pullback in investor housing, in particular, has been quite substantial and if there is no inflation, which we should probably see in today’s data then it has opened the door for them to cut rates – and in the past they moved on Melbourne Cup day.


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