RBA cash rate to lose influence: brokers

Many brokers now feel that the cash rate is no longer the right benchmark for mortgage rates, with over 40 per cent of brokers expressing this opinion in a recent The Adviser straw poll.

Despite growing broker disillusion towards the significance of the cash rate, the majority of the 278 respondents still believe the cash rate was still the right indicator for mortgage rates.

This may dilute in the future, however, as market forces influence bank and consumer action.

Speaking to The Adviser, Aussie's executive director James Symond said while there is "no doubt" that the cash rate is still the key benchmark for mortgage rates.

"That said, moving forward I think we will see more and more banks move independently of the Reserve Bank. It is a free market and if the banks want to move up or down irrespective of the RBA, then they can and will do so," he said.

"Ultimately, consumers and competition will sort out whether or not the moves they make is the right one. If a bank moves its rates up independently of the RBA, consumers will vote with their feet."

Ballast's general manager Frank Paratore agreed with Mr Symonds and said while the cash rate would always act as a key benchmark, the industry should not be surprised to see more banks moving of their own accord.

"The banks have spoken at length about the cost of funds, so I won't be surprised to see some out of cycle rate hikes in the future," he said.

"The cash rate is the right benchmark for now, but there are mitigating factors which affect Australia's lenders. Whether or not the banks choose to toe the RBA line every time there is a rate change is completely up to them – ultimately they have a business to run."