Banks could be scrambling to drop their mortgage rates and entice borrowers in a matter of hours if the Reserve Bank does what most economists expect and hands down an interest rate cut today.
The market is largely expecting the central bank to deliver some much-needed relief to homeowners when it unveils the decision from its first cash rate meeting at 2.30pm (AEDT).
Ahead of that highly anticipated announcement, Westpac yesterday tweaked its variable mortgage rate by removing a previous 0.40 per cent increase that came in after two years, instead keeping its lowest offer at 6.44 per cent.
Other banks have been lowering their own mortgage rates in recent months in anticipation of a looming cut from the RBA, and financial comparison site Canstar expects the lenders to continue clamouring for customers if the central bank does ease the cash rate.
“The mortgage wars are set to re-ignite on the back of a RBA rate cut,” data insights director Sally Tindall said.
“The big banks will almost certainly pass the first RBA cut on in full to their variable rate borrowers, however, we could see some lenders cutting new customer variable rates even further to capitalise on what could become a refinancing revival.”
All of the big four banks have forecast a cut, and financial markets are pricing in a 90 per cent chance of the RBA reducing the cash rate for the first time since November 2020.
But not everyone is convinced the RBA board will be quite ready yet to pull the trigger on the first cut in almost five years.
“The reality is the Reserve Bank would rather wait another month than risk moving too soon,” Queensland University of Technology’s Noel Whittaker told Finder’s RBA survey.
“The problem is inflation in the building industry remains massive, labour shortages are severe, and the job market is still strong – keeping inflationary pressure on the economy.
“Right now, I don’t see how a rate cut can be justified.”
Sean Langcake from Oxford Economics Australia is of a similar opinion.
“The February decision will be a very close run,” he said.
“Inflation in Q4 was a little weaker than the RBA expected, but there are still questions about where underlying inflation will be once the impact of subsidies wash out.”
Of the 37 experts surveyed by Finder in the lead-up to today’s decision, 27 predicted the RBA will cut the cash rate.
