The September cut in the official cash rate has been welcomed as a move in the right direction but the broking industry is not convinced that 25 basis points alone will be enough to boost lending volumes.
Almost 40 per cent of respondents to Mortgage Business’ latest straw poll – conducted in the run-up to Tuesday’s RBA meeting – believed a 50 basis point rate cut would have been a more responsible move.
Tanya Sales, general manager of Finconnect, said the RBA would need to cut rates by a lot more than 25 basis points for borrowing to pick up.
“Both consumers and small business are suffering. Rates will need to come down by at least 0.75 to one per cent before we see consumer confidence improve,” she said.
Steve Kane, CEO of FAST, said to stimulate a real upswing a further 25 to 50 basis points minimum is necessary.
But while Mr Kane would have liked to have seen more of a reduction, he said the RBA was taking a “measured approach” to keep inflation in tow.
“The signal that a downward cycle in rates is on the way will improve confidence and remove capacity problems for those borrowers who are really stretched,” he said.
Corey Drew, Mortgage Force state manager for South and Western Australia, said that the standard variable rate would have to fall much further before there was any real impact on borrower confidence.
“Once lending rates get down to around 8.5 per cent I think we’ll see a lot more activity,” he said, highlighting first home buyers and investors as market segments most likely to pick up.
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