A top economist claims the prudential regulator has “opened the door” for banks to hike rates even if the Reserve Bank lowers the official cash rate.
Some economists believe the Reserve Bank could reduce the official cash rate at its next board meeting in February – but Domain Group senior economist Andrew Wilson said that would not necessarily translate into cheaper home loans or a more buoyant housing market.
“We are getting into this environment of a disconnect between mortgage rates and official interest rates,” he said.
“There has been a little bit of a Mexican standoff between the banks and the Reserve Bank.
“I think we’ve still got the prospect of rate rises from the banks through to July next year when they have to consolidate their new loan book capital backing.”
Regardless of how the RBA acts, it might not have any impact on mortgage rates, Dr Wilson said, adding that there will still be upward pressure on mortgage rates next year.
“We know that APRA have told the banks that they can’t grow their investor loan books by more than 10 per cent annually,” he said. “I’m not so sure that has ended either.
“It is as though APRA has opened the door for the banks to act in their own commercial interests under the cover of these macroprudential policies.”
Dr Wilson said housing markets will continue to flatten as a result of rising mortgage rates.
“I wouldn’t be surprised if we saw interest rates increasing again as they did in October,” he said.
“We saw the auction markets fall away as a result of that, which is a confidence thing.”
[Related: Andrew Wilson slams investor crackdown]