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Westpac’s chief executive officer Gail Kelly has said the bank’s lending rates will come under pressure over the next few months as funding costs continue to rise.
According to Ms Kelly Westpac may be forced to raise interest rates ahead of any moves made by the RBA.
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Speaking at a media conference following the bank’s full year earnings announcement, Ms Kelly said the RBA had made the right decision lifting rates over two consecutive months, given the indications that the economic downturn was not as bad as originally expected.
"Savings are going to be rewarded more, and debt is going to cost more for everyone, whether you're an individual, a business, a corporate, or a bank," she said.
"We're paying more for deposits because they're such a valuable asset for our customers and for us."
Currently the banks pay approximately 90 basis points over the bank bill swap rate for wholesale funding, a far cry more than the 10-15 basis points they paid in September 2007.
"The costs of funds are linked to a lot of things not much linked to the Reserve Bank rate," Mrs Kelly said.
Following the Reserve Bank’s decision to lift interest rates on Tuesday, the four major banks, including Westpac, said they would match the 25 basis point rate increase.
