Via Martin North:
The Bank Bill Swap Rate continues to track down, which means that Banks are sitting on considerable funding advantage, which is being used to discount attractor mortgage rates.
However, there is a strong case now for banks to reverse their out of cycle rate hikes imposed on borrowers over recent months, irrespective of whether the RBA moves the cash rate down next month.
This would help household with their budgets, and help support the weakening economy. They could also stop the rot in terms of falling bank deposit rates.
The question is, will they?
In short, they could cut more than the RBA.
I doubt it. They still need the margin. It’s the moving average of BBSW that matters and banks are still absorbing the previous margin crush.
As well, BBSW is moving in advance of the certain June rate cut so it is not yet entirely clear that all of the widened spread is gone.
Still, there’s a good change that banks will now pass 20bps+ of each cut so it’s another marginal positive for the housing market.