The Commonwealth Bank of Australia (CBA) could be forced to raise its mortgage lending rates by 30 basis points above the RBA, according to a new report.
The report by Morgan Stanley has found that CBA may have to lift rates in order to cover the higher cost of funding and maintain its earnings margins next year.
The report’s author Richard Wiles said CBA's retail division's profits could fall by as much as 10 per cent if the bank was not able to "reprice" its mortgages.
"In order to offset the higher funding costs and maintain next year's margins with the second half of last year, we believe CBA would need to raise standard variable rates out of cycle by as much as 50 basis points during the year," the report read.
"We think that's going to be difficult to achieve and our forecasts assume 30 basis points of out-of-cycle rate rises."
In the six months to December 31 2009, CBA reported cash profit of $2.9 billion.