The Reserve Bank of Australia (RBA) is tipped to cut interest rates further at its monthly board meeting.

COVID-19 pushed Australia into its first recession in three decades and into its biggest quarterly drop in GDP since records began in 1959.

Australia’s cash rate was already at a record low of 0.75 per cent at the start of 2020 but the RBA quickly reduced it to 0.25 per cent by March.

While the worst of the health aspect pandemic is seemingly over in Australia, the economic impact is expected to last for several years.

‘The Airport Economist’ Tim Harcourt bluntly told Stockhead yesterday, “(The RBA) have little choice.”

BetaShares’ David Bassanese similarly noted the bank needed to be seen to be doing something in the face of low inflation and high unemployment.

CommSec’s Ryan Felsman expects not just a cut but interest rates to stay low for at least three years.

While consumer confidence is recovering he pointed to elevated joblessness and the uncertainty of what will happen when loan repayment holidays expire as influential factors.

 

Hands up who likes RBA interest rate cuts?

ASX stocks in the lending sector are the most obvious.

This list includes Money3 (ASX:MNY)Wisr (ASX:WZR), MoneyMe (ASX:MME), QuickFee (ASX:QFE)and Plenti Group (ASX:PLT)

The latter three stocks have only joined the ASX in the last 18 months. MoneyMe and QuickFee are above their IPO prices while Plenti, which listed last month, has not recovered since its decline on its opening day.

The ASX is also home to a handful of finance brokers – Mortgage Choice (ASX:MOC)CML (ASX:CGR)Australian Finance Group (ASX:AFG), Yellow Brick Road (ASX:YBR) and Resimac (ASX:RMC).

 

Here’s a list of ASX lending & finance broking stocks

Code Company Price %Mth %SixMth MktCap
MNY Money3 Corporation 2.22 6 39 $416.9M
MME Moneyme Limited 1.35 -7 47 $235.5M
QFE Quickfee Limited 0.485 -10 94 $100.7M
PLT Plenti Group Limited 1.05 -16 0 $185.7M
WZR Wisr Ltd 0.2 5 29 $224.5M
MOC Mortgage Choice Ltd 1.03 -5 49 $133.7M
CGR Cml Group Ltd 0.325 -2 -36 $74.0M
AFG Aust Finance Grp 1.96 -8 29 $539.4M
YBR Yellow Brick Road 0.084 1 35 $27.2M
RMC Resimac Grp Ltd 1.35 -7 60 $566.8M

Several of these stocks fell as COVID-19 hit Australia because investors feared a rise in bad debts and people tightening their belts.

But for these stocks, the opposite has happened – many of them reported increased lending volumes and profits during COVID-19.

Existing customers seeking to refinance their debts have also been a windfall for these stocks, particularly for Australian Financial Group (ASX:AFG) .

Another boost to the sector came in September when the Morrison government rolled back responsible lending laws.

The change has many concerned the responsibility for assessing the suitability of credit will shift more from lenders to customers.