Banks will go it alone to cut rates: ACCC
Competition regulator Rod Sims expects banks to cut mortgage rates independently of the Reserve Bank if funding costs continue to fall, and is watching how lenders respond to the improvement on credit markets.
Banks have enjoyed wider profit margins in recent months after a sharp fall in the cost of new wholesale debt, putting renewed scrutiny on their mortgage rates.
While lenders have so far offered discounts to new customers and lower fixed rates rather than change their variable mortgage products, some brokers view out-of-cycle mortgage rate cuts as inevitable.
Mr Sims, chairman of the Australian Competition and Consumer Commission, said he also expected banks to eventually pass on lower costs to borrowers.
"Logically if you, as it were, push up rates independently of the Reserve, there must come a time when you push them down," he said this week. "I think it would be absurd for it to be otherwise."
Wholesale funding costs have fallen to their lowest level since 2009, the RBA said this week. Some analysts also say competition for deposits is waning, giving lenders an opportunity to cut independently of the central bank.
Mr Sims said he was "a little bit optimistic" smaller lenders would put more competitive heat on big banks, citing Macquarie's decision to team up with Mark Bouris' lender Yellow Brick Road as a promising development. But he would not speculate on when banks might cut rates independently of the RBA, saying, "These things take time."
"I'm a little bit optimistic that the others can take advantage of the generally lowering funding costs and be more competitive with the big banks so that we'll have the competition that all Australians want and deserve on this topic," he said.
Mr Sims this week approved a deal allowing greater concentration in the mortgage broking sector, with Commonwealth Bank allowed to swallow Aussie Home Loans.
The big four banks dominate the home loan market but profits are facing slower growth as housing credit expands at its slowest annual pace on record.