news

More out of cycle rate hikes to come

By webmaster

The majors' recent out of cycle rate movement could be the first of many, one industry stakeholder has claimed.

Speaking to Smart Property Investment's sister publication, The Adviser, Advantedge's Brett Halliwell said the costs of funds had risen "significantly" for Australia's lenders, putting pressure on their margins and thus forcing them to lift rates independently of the Reserve Bank.

Advantedge is a wholesale loan servicer, which is owned by NAB.

On Monday, NAB and CBA became the last of the majors to move their rates out of cycle with the RBA, with CBA lifting the interest on its standard variable rate by 10 basis points, while NAB lifted its rates by 9 basis points.

Mr Halliwell said these out of cycle rate movements weren't surprising given the current state of the wholesale funding markets.

"The turmoil that we are seeing in Europe is having a negative impact on ever sector across the globe, particularly the financial sector," he said.

"The problems in Europe have in turn ensured that the cost of funding from wholesale markets globally has gone up.

"In recent months, bank CEOs have been discussing the disconnect between the RBA's cash rate and their variable rates. The reality is, bank rates are not driven by the RBA, they are an element, but the overall cost of funding has gone up which means we could see the banks move out of cycle a few times in order to ease the pressure on their margins."

Mr Halliwell's comments have been supported by the RBA.

Speaking at a Bloomberg seminar in Sydney yesterday, the RBA's assistant governor, Guy Debelle, said the cost of bank debt had risen since the middle of last year, affecting both unsecured debt and covered bonds.

''Investors are demanding much higher compensation for bank credit risk now than they were in mid-2011,'' Mr Debelle said.

''This global repricing of bank debt has clearly affected the Australian banks' wholesale funding costs."

More out of cycle rate hikes to come
SPI logo
Thank you.

Your enquiry has been sent to a local Aussie Mortgage Broker.

We will be in contact with you shortly.
Opps.

error occurred.
Unfortunately Aussie cannot attend to your home loan related enquiry at this stage as you must be a citizen or permanent resident.
Do you need help finding the right loan for your investment?
What Aussie do for you:
  • Give expert mortgage advice to help you find great investment loan deals
  • Help you maximise return by lowering financing costs
  • Save you time and effort by helping with the paperwork
First name
Last name
Location
Mobile Number
Are you an Australian Resident?
promoted stories

Top Suburbs

Highest annual price growth - click a suburb below to view full profile data:
1.
BLUE BAY 49.18%
2.
PAMBULA 43.5%
3.
BERKELEY VALE 42.74%
4.
POINT PIPER 40.52%
5.
NORTH TURRAMURRA 38.12%