BOQ, Auswide Bank respond to decision
The Reserve Bank of Australia has lifted the official cash rate by 0.25%, taking it to 3.60%.
The interest rate on exchange settlement balances has also increased by 0.25%, taking it to 3.50%.
It marks the 10th rise in the official cash rate since May 2022, when the RBA took the cash rate off a record low 0.10%, to 0.35%.
Announcing the February monetary policy statement on Tuesday afternoon, RBA governor Philip Lowe said global inflation remained “very high”.
Over the year to December, CPI inflation in Australia was 7.8%. According to latest ABS figures, the monthly CPI indicator for the year to January was 7.4% - lower than the 8.4% annual increase from December 2021 to December 2022.
The monthly CPI indicator suggests that inflation has peaked in Australia, Lowe said on Tuesday.
“Goods price inflation is expected to moderate over the months ahead due to both global developments and softer demand in Australia. Services price inflation remains high, with strong demand for some services over the summer,” Lowe said.
The board’s priority is to return inflation to target, Lowe said, noting that high inflation “makes life difficult” for people and damages the functioning of the economy.
In his closing comments, Lowe said the Board expects that further tightening will be needed to ensure that inflation returns to target. His tone was little changed from his statement in February, when economists observed the more hawkish policy tilt, the RBA having dropped its previous guidance that it was not on a pre-set course.
MPA spoke to Bank of Queensland and Auswide Bank about the RBA’s latest official cash rate decision.
BOQ Group general manager broker, credit cards and loyalty Johnny Lockwood (pictured above left) said the bank understood the ongoing challenges of the rising interest rate environment, but also noted the opportunities available for quality mortgage brokers.
“With the rising pressures, customers will be looking for the guidance and support that mortgage brokers provide,” Lockwood said.
The bank is working closely with product and pricing teams to support existing customers and to attract new to bank customers, Lockwood said.
Giving the rapid monetary policy tightening to-date, Auswide Bank head of third party Tracy Field (pictured above right) said that she was hopeful that there would be more evidence of a slowdown in household spending and of inflationary pressures starting to ease.
“This is necessary to avoid a much harder landing which would impact employment, housing and mortgage defaults,” Field said. “Auswide Bank has been here for 57 years helping Australians to achieve ownership and we will continue to work with our customers as they navigate what is for many, unfamiliar waters.”
Support for expiring fixed rate borrowers
As with other lenders, Lockwood said there was a significant spike in customers across BOQ Group (which includes Virgin Money Australia and ME Bank) with fixed rate loans expiring over the next one to two years.
The bank continues to work with customers and brokers by contacting them well ahead of their fixed rate expiry date to discuss their options, he said.
“To make dealing with us as seamless as possible, we are streamlining our processes and policies, improving our broker portals and regularly upskilling our inbound and outbound customer service and contact teams,” Lockwood said.
Auswide Bank currently works closely with its broker partners to review customers’ financial position, Field said.
“Along with a number of other lenders, we have been proactive in recognising the impact of our customers who will be coming off low fixed rate loans shortly and discussing options with them,” Field said. “We encourage our brokers and customers to communicate with us early if they are experiencing any signs of mortgage stress so we can assist.”
Being proactive in a refinancing market
With refinancing playing a significant role for brokers and their clients in 2023, BOQ Group’s main message for brokers is to keep communication front of mind.
“A rising rate environment can cause customer anxiety. Some customers will be proactive and come to you, but many won’t,” Lockwood said.
It is important that brokers remain proactive, monitor their book movement, identify fixed rate maturities and contact clients to show their support, he said.
“The old saying ‘customers don’t care about how much you know, they care about how much you care’ couldn’t ring truer in this current market,” Lockwood said.
Noting that the battle for the refinancing dollar had generated many cashback offers, Field said Auswide Bank had made a decision not to participate in cashbacks. Auswide Bank had seen customers chasing cashbacks refinance between lenders, which Field said had financial implications for brokers, with increased occurrence of clawback evident.
“We will continue to work with our brokers to make sure that customers understand the medium and longer-term benefits of having a better discount margin on their home loan for the duration of their credit contract, rather than the ‘quick fix’ of a cashback which is often not paid for 60 days,” Field said.
As part of its digital transformation journey, BOQ Group has rolled out NextGen ID as an alternative option to the current identification method, providing a secure way to complete customer ID checks digitally, Lockwood said.
“Coming up for BOQ and Virgin Money brands, we are looking forward to delivering a new secure digital signature process,” Lockwood said.
In March, BOQ announced new savings rate, with myBOQ Future Saver account lifting to a rate of 5.15% per annum.
Auswide Bank currently has an investor campaign, offering a 0.20% discount on investment home loans when a client brings their owner-occupied loan to the bank at the same time, Field said.
“At a time where we see investment rates much higher than owner occupied lending, this campaign has the ability to reduce a customers’ investment lending to owner occupied rates, dependent upon products nominated and the LVR pricing band,” Field said.
In a March Economics Update, CBA head of Australian economics Gareth Aird forecast two further 25 basis point rate hikes in March and April, for a cash rate peak of 3.85%.
Noting that production and consumption over the December quarter were only partially impacted by the RBA’s rapid rate rises, Aird said that only 185 basis points of the RBA’s already delivered 325 basis points of tightening (now 350 basis points) had hit the cashflow of home borrowers on floating rate mortgages. Given the extraordinary amount of policy tightening to-date, Aird said he expected that the landscape would change.
