Interest Rate Update – July 2018

Cash Rate – No change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 1.50%.

Whilst the RBA is comfortable to wait until possibly well into 2019 before they next raise the cash rate we have seen (since February) an escalation in wholesale funding costs, primarily influenced by a stronger US economy and rising interest rates in that country.    The major Australian Banks raise only about 20 per cent of their funding on short term wholesale markets but their net interest margins will be squeezed and this adds to the Banks funding pressures from tighter capital requirements. The past couple of weeks has seen Bank of Queensland, Suncorp, AMP Banks and ME Bank increase their lending rates between 0.4 per cent and 0.12 per cent.  The major Australian Banks have been willing to absorb the costs in a bid to build market share but if the increased funding costs are sustained the Banks may be forced to raise interest rates independently from any change in the official cash rate.

For more information, or if you would like a free review of your residential, commercial or SMSF loans against other competitive products in the market please contact Peter, David or Simon via this email, our phone: (03) 9882 2500, or visit www.firstpointgroup.com.au

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