New financial year heralds broker opportunity
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|Wednesday, 23 June 2010|
After six rate hikes in eight board meetings, the RBA has finally indicated that it will leave rates on hold at 4.5 per cent for the immediate period ahead.
By: Jessica Darnbrough
In the minutes of the 1 June board meeting, the RBA implied that the pause in monetary policy was appropriate for the "near term" as Europe continues to be plagued by escalating debt problems.
In fact, the minutes all but rule out a move in July, with the RBA stating that it would wait to see inflation data - due out at the end of July - before deciding on another rate rise.
If, and when, the RBA does decide to lift rates again it seems inevitable that it will hike the cash rate by just 25 basis points. In fact, the RBA hasn't upped rates by more than 25 basis points since February 2000, and in the 10 years since the RBA has lifted the cash rate by a quarter percent 21 times.
With so many 25 basis point increases over the last decade the question begs: are they having the desired effect on the economy, or are we now programmed to shrug off each hike?
If the latest consumer confidence statistics from the Westpac - Melbourne Institute are anything to go by, the recent spate of rate hikes would seem to have taken a toll on confidence.
According to the latest index, optimism fell for the second consecutive month in May - and is now back at GFC levels.
This dip in optimism is further reflected in falling loan volumes.
Loans to owner occupiers fell 1.8 per cent in April, according to the Australian Bureau of Statistics, and there is good reason to expect activity to flatten over the coming months.
So as we near the end of the financial year what market conditions can brokers look forward to for the year ahead, and what are the prospects for business growth?
The indications are that the stellar property price growth recorded in the second half of 2009 cannot be maintained long term.
BIS Shrapnel's latest Residential Property Prospects report warns that house price growth will flatten to single digits over the coming three years.
What will be interesting to see in the short term is where fixed rates track. We've already seen most of the majors slash fixed rates and this may stimulate refinancing activity in the coming months.
As the new financial year kicks in there's no better time for brokers to reacquaint themselves with clients that may be long overdue a call.
The new financial year is the perfect opportunity to touch base with your customers to review their situation and find out what their plans are for the year ahead - and that's a gilt-edged opportunity to write business.