Ensure you never miss an issue of the
real estate business bulletin
Competition driving cuts: Economist

Competition driving cuts: Economist

by Michael Masterman 0 comments

Increased competition in the mortgage market, not future cash rate expectations or cheaper funding, is the driving force behind recent fixed rate cuts, according to a leading economist.

Increased competition in the mortgage market, not future cash rate expectations or cheaper funding, is the driving force behind recent fixed rate cuts, according to a leading economist.

Following a wave of fixed rate rises on over 180 products late last year, several lenders, including two major banks, have recently cut fixed rates despite the broad trend of longer-term borrowing costs increasing, according to AMP chief economist Shane Oliver.

“The more recent moves seem to be more reflective of competitive positions,” he said.

Mr Oliver dismissed suggestions that the downward movement in fixed rates was a reflection of lender expectations of further cash rate cuts.

“There seems to be a fair bit of competitive pressure in the market and so that is probably playing a bigger role than a change in the banks' expectations regarding short-term interest rates,” he said.

While bond yields, a broad indication of long-term funding costs, have come off a little following some mixed economic data released this year, including weak job data and strong retail figures, Mr Oliver said he expected funding costs to continue to rise throughout the year.

Meanwhile, HSBC chief economist Paul Bloxham gave more weight to the easing in bond yields saying a stabilised global economy and downward pressures on funding costs have played a role in reducing fixed rates.

“The cost of funding has continued to drift downward in recent times as financial conditions globally have stabilised,” he said.

Talking in broad terms about a current reason for rate cuts, Mr Bloxham said that “more than anything else, it’s probably that the global cost of funding has been drifting downwards”.

Competition driving cuts: Economist
lawyersweekly logo
promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2017

The REB Top 100 Agents ranking is the foremost ranking of agents in Australia. It has set the bar for excellence in Australian real estate. To be ranked as an REB Top 100 Agent is the standard real estate professionals strive for. See the full 2018 ranking here!

featured podcast

featured podcast
The difference between an average agent and one who dominates

McGrath Crows Nest’s Peter Chauncy is number 10 in this year’s REB Top 100 Agents ranking. Peter, however, is more likely not surprised ...

View all podcasts

Would you consider working for Purplebricks or a similar 'DIY' model?

Yes (7.2%)
No (80.9%)
Perhaps - make me an offer (12%)

Total votes: 209
The voting for this poll has ended on: July 13, 2018
Do you have an industry update?