Commonwealth Bank cost woes 'could create mortgage problems'

Australia's Commonwealth Bank has raised concerns that its own borrowing costs could rise as a result of the European debt crisis – which in turn could impact upon home loan customers.

According to the bank, the cost of funding has begun to rise as investor confidence takes a battering from the storm in Europe.

The Commonwealth Bank, which is one of Australia's biggest mortgage lenders, said the country's economy is not immune to the financial turmoil taking place on the other side of the globe.

In fact, the organisation is already warning of subdued credit growth in the near future, thanks to tighter margins.

Ralph Norris, the bank's chief executive officer, said that 2012 would be a challenging year but noted that customers could benefit from improved service as banks try and generate more business from cash-strapped consumers.

In the third-quarter of 2011, house prices fell by 1.2 per cent, according to the latest figures from the Australian Bureau of Statistics' Established House Price Index.

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