A cut to the official cash rate is now universally expected in September but the industry remains divided over how much will be passed onto the borrower.
More than 68 per cent of Mortgage Business readers revealed in a recent straw poll that they expected some or all of the RBA’s rate reduction would be passed on to borrowers.
Nearly a third however believed borrowers would see nothing.
Martin North, managing consulting director of Fujitsu Consulting, told Mortgage Business that he expected borrowers to see at least some of a rate cut reflected in their monthly mortgage repayments.
“We are modelling for a 25 basis point cut in the cash rate in September and a further 25 basis points in November,” he said.
Mr North said a “minimum of two thirds” of that should be passed on to consumers, but he conceded that a number of factors would influence the banks’ final decision.
“This has become very much a political issue,” Mr North said.
“Most of the banks have indicated that they will not be dictated to on this topic.”
“But even the RBA has been more direct than ever before, indicating that there would be no good reason for banks to not pass rate cuts on,” he said.
Whatever the move, Mr North was certain the banks would play their cards the same.
“The competitive tension in the Australian lending market is the lowest it’s been in around ten years,” he said.
Non-bank lenders had all but disappeared, Mr North said and the landscape was now left with four “single-minded” banks working as if they were one.