Brokerage calls for rate pause
Mortgage brokerage the Loan Market Group has urged the RBA to leave rates on hold when it meets next week.
The brokerage’s chief operating officer Dean Rushton said rates were already biting credit approvals and large segments of the retail sector.
“There are no signs of improvement in either of these areas,” he said.
“Our view is that rates should stay on hold at 4.5 per cent or the RBA risks further fall out from already stressed consumers and home owners.”
Mr Rushton said the RBA is more likely to increase rates again in early 2011; however major banks may raise rates independently of the central bank before Christmas.
“We consider that at least one of the major banks will move outside of the RBA at some stage,” he said.
He said increasing funding costs and roll-over to more expensive debt means the banks will have to either increase their rates or reduce their lending volumes.
Mr Rushton said these changes would also be a blow to potential first home buyers.
“While current lending policies are generally favourable towards first home buyers, we’ll see them fall out of the market place again if lenders and/or the Reserve Bank raise rates,” he said.
“We’d only just seen first home buyers start returning to the market in numbers after the scaling back of the boosted First Home Owners Grant and changes to lenders deposit criteria, so this would be a real shame.”