July interest rate and lending environment update

The Reserve Bank of Australia (RBA) has kept interest rates steady this month, however most economists are predicting further falls before the end of the year.

The Brexit result has led to an increase in market volatility and a fall in confidence levels, which will likely have some impact on the economy. This impact will be felt more overseas than in Australia, but any impact on our trading partners will inevitably affect us. The RBA will be monitoring the situation closely to ensure that the global volatility won’t lead to further negative inflationary pressures. But right now, rates are more likely to remain stable or fall, rather than increase.

Over the past month we’ve seen some banks relax their lending rules, allowing lower deposits for buying residential investment properties. Although this isn’t an industry-wide trend, and many of the banks are still hanging onto the lower loan to value ratios. However a mixture of increased competition and better compliance with lending rules is allowing some funders to be more aggressive, especially in the investment space. Investment lending has fallen, so the banks are starting to price for more business to maintain their market share.

The commercial lending environment remains relatively stable with no major changes in policy. As before, the banks are only interested in well-structured, strong commercial deals, and are making no hesitation in turning away those that are not. Depending on the general business and economic sentiment over the next few months, this may change if the banks need to compete for a shrinking pool of quality borrowers.