Banks have quickly re-priced their mortgage books in reaction to political and macro prudential pressure, causing brokers to review the impact of changes on the sector. UBS notes, rather than simply being a knee-jerk reaction to the Reserve Bank of Australia’s cash rate changes as it was in the past, changes in bank mortgage lending rates have recently been instigated by macro prudential tightening. In the past the cash rate move was the strongest influence on borrowing rates.
As 85-90% of mortgages are variable, the transmission mechanism led to an almost immediate impact on the flow of new loan demand and the cash-flow effect for existing borrowers as banks re-priced their back books. Hence, the recent downtrend in the RBA cash rate to a record low of 1.5% provided a prolonged and cyclical boost to the economy,as average borrowing rates dropped to under 5%.
- FUNNY VIDEOS