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By: Staff Reporter
Rising funding costs are crippling general borrowers, the Reserve Bank of Australia’s assistant governor Dr Guy Debelle has said.
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According to Dr Debelle, business borrowers and people with personal loans are being charged inflated rates to help keep mortgage rates down.
Speaking at the Australian Banking and Finance Mortgage Innovation conference in Sydney yesterday, Dr Debelle said bank funding costs had risen approximately 1.4 per cent since the onset of the global financial crisis, while mortgage rates have only increased by 1.1 per cent (on average) over the same period, with other borrowers left to pick up the run-off.
“The competitive state of the [mortgage] market is reflected in the fact that home lending rates have not risen by as much as funding costs,” Dr Debelle said.
“In contrast, banks’ business and personal loans have increased by even more relative to the cash rate, and by more than the rise in funding costs.”
But interest rates aside, Dr Debelle said home borrowers were also benefiting from a ramp up in competition in the sector.
As the major banks have increased their lending rates to recoup increased funding costs, and as funding costs for securitisation have fallen, Dr Debelle said smaller participants have become increasingly more competitive.
“With the securitisation market showing greater vitality, the housing loan market remains contestable. Any widening in margins is likely to attract new competitors into the market,” Dr Debelle.
