A home-loan broker has warned borrowers the nation’s banks are more likely to increase interest rates than lower them.

The banks were also likely to hold back some or all of any future rate cuts by the Reserve Bank.

The Commonwealth Bank of Australia (CBA) has angered the federal government after it increased its standard variable mortgage rate, fixed-rate home loans and business lending rates 10 basis points from Monday.

Loan Market Group executive director John Kolenda says there is still a possibility the Reserve Bank of Australia (RBA) could cut the official cash rate again if the economy remains in the doldrums.

“But the decision by the CBA indicates the major banks may be more likely to move rates upwards rather than downwards, or hold back some or all of future RBA cuts,” he said.

The RBA cut the cash rate by 425 basis points between September last year and April, bringing them to a 49-year low of 3.0 per cent.

RBA Governor Glenn Stevens has said there is scope to cut the cash rate further if needed.

Just under 400 basis points of the official cuts have been passed on to borrowers by the retail banks, reducing monthly repayments on a $300,000 mortgage by about $700 a month.

Mortgage holders should be trying to repay more than the minimum required on their loan to prepare for the inevitable future increases in interest rates, Mr Kolenda said.

“While it is very tempting to be using the savings from the lower rates now to boost spending power, people are better off making as big a mortgage payment as they can afford,” he said.

Being ahead in repayments also built up an “equity buffer”.


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