Aussie banks expect to raise interest rates further

The major banks have warned of further interest rate rises in 2010.

Continuing high funding costs for banks and various regulatory changes will mean that the cost of borrowing could get even higher next year, the Australian Associated Press (AAP) has found.

The AAP said that since the Reserve Bank decided to raise the official cash rate by 25 basis points at the beginning of that month, competition among the major banks has expanded, with each offering a different set of rates.

"I think it’s probably the first time in a long time where we’ve seen such a range of pricing differences between the majors, individually between each other, and also the second tier banks," Ralph Norris, chief executive of the Commonwealth Bank of Australia, told the news provider.

The report found that new regulations requiring banks to hold more capital and high quality liquid assets would result in a reduction in credit availability, while banks would also have to pass on a standard rate rise to borrowers.

Such outcomes will increase the need for bank customers to compare home loans and compare credit cards across the different banks.

This week the Daily Telegraph reported Loan Market Group research which found that a growing number of Aussies aged between 18 and 24 years were struggling to secure home loans in the current environment.

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