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Prospects of higher interest rates are increasing as expectations of official cash rate rises increase sharply and lenders concede they may need to lift rates as funding costs rise.
According to a Credit Suisse Group AG Index, which measures the number of rate hikes or cuts priced in for the next 12 months, the RBA will hike the cash rate by 78 basis points in the year ahead.
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The reading of the Index reflects last week’s solid GDP figures, before which the Index was tipping a decrease of 3 basis points in the year ahead, according to Bloomberg.
Conjecture is also rife that home loan rates have already bottomed out, following the admission from CBA this week that long-term home loan funding costs were continuing to rise and rates were under review.
According to the Herald Sun, a string of lenders, including NAB, are also considering their home loan rates.
"We expect overall costs to increase into 2010, driven mainly by the rising average cost of term wholesale and retail deposit costs," a NAB spokesperson told the daily today.
