Funding costs are rising for Australian banks

Banks across Australia have been urged to lower the interest rates on their mortgages and business loans after the Reserve Bank of Australia (RBA) sanctioned a rate cut – but there are other things to consider.

Although the official cash rate has fallen by 50 points to 3.75 per cent, bosses at the Bank of Queensland (BoQ) have warned that customers are unlikely to receive the full benefit of this readjustment.

He said that funding costs are rising all the time and banks must juggle the needs of their customers and shareholders before they sanction any reductions.

Chief executive of the institution Stuart Grimshaw said the BoQ would only be lowering its rates by 35 points.

"Increased competition in retail term deposits continues to put upward pressure on the Bank's cost of funds," he remarked.

Of course, news of the RBA's rate reduction was not universally welcomed, as savers and term deposit holders will obviously lose out if the rates attached to their funds are lowered.

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