Pressure on home loan rates 'to continue for some time'

Friday 15 October 2010

Article by Mozo

The pressure on the major banks to keep pushing home loan rates higher "is going to be there for some time", a commentator has said.

Stephen Bartholomeusz of Business Spectator argued that despite the Reserve Bank's (RBA) surprise decision to keep the official cash rate on hold earlier this month, there will be plenty of opportunities for the banks to implement their own independent interest rate hikes. Indeed, he noted that the RBA is widely expected to increase rates by at least 100 basis points before the end of next year.

He was commenting after the Commonwealth Bank's Ralph Norris this week joined Westpac's Gail Kelly and ANZ's Mike Smith in suggesting that the banks will soon have to start raising rates above the official cycle to meet higher funding costs.

"The new focus is on next month's RBA board meeting," observed Mr Bartholomeusz. "If the RBA still doesn't move, it would appear from the increased intensity of the majors' discussion of their funding issues that it is quite possible that they are contemplating going it alone."

Such moves by the banks may tempt more Australians to compare home loans in search of better deals. According to the latest Home Finance Index by Bankwest and the Mortgage and Finance Association of Australia, more than half of borrowers are currently sacrificing a range of everyday necessities to accommodate higher interest rates.

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