Any business excited about the prospect of a bit of rate relief with the RBA rate cut announcement today might not want to “hold their breath”. In our recent discussions with lenders we deal with, it has become apparent that the Business Banking departments of the major banks are under some considerable margin squeeze currently. We have seen in evidenced in recent quotes that we have sought. 6 months ago we were getting some amazing rates quoted for loans secured against commercial property. These were at worst case less than 2% above BBSY, but some were well under 1.5% margins. However recent quotes for similar deals has seen the banks increase these margins to well over 2% and some nearer 3%. The margins have almost doubled.
When we press the bank for a reason why, the lenders we deal with express ignorance publicly but then out of the back of the hand they confess that the risk grade machines have all been turned up. It is unclear to me whether this is an expression of perceived risk, or simply a recognition that the division needs significant profit improvement if budgets are to be achieved by end of September. My contacts do however suggest that rates should drop again after September, which suggests that this is a play for profitability. If this is the case, then the likelihood of business customers getting the benefit of the rate cut seems unlikely to me.
If you would like a review of the rates you are paying why not call for an obligation free discussion and we can give you an indication.