The case for the RBA to ‘slow down’ rate hikes

Many home borrowers have only felt the impact of one or two of the Reserve Bank of Australia’s four interest rate rises this year because of lags of up to more than two months forCommonwealth Bank of Australia economist Gareth Aird said the delay in official interest rate rises flowing through to monthly repayments may explain the dichotomy of consumer sentiment being weak but spending remaining robust.

The banks then typically give a further 20 days to 30 days before the weekly, fortnightly or monthly repayments increase. “It doesn’t matter at any other point in history, but we haven’t had tightening like this, so this is why it matters more,” he said. It typically imposes the higher interest rate charge about a week after the RBA decision, but then gives customers at least an additional 20 days before monthly minimum repayments are adjusted.National Australia Bank applies the higher interest rate 10 days after the RBA decision, but provides about 30 days’ notice when a customer’s repayment will change if they are on the minimum repayment amount.

Source: Loan Digest (loandigest.net)

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