Recent Changes to Interest Rates

As published in the news recently, CBA, ANZ and Westpac have announced some small home loan interest rate rises along with Suncorp and some other smaller Lenders, all independently of any Reserve Bank / Cash Rate movement. The Cash Rate has not changed since July 2016.

We monitor this closely to ensure our customers’ loans remain competitive. To summarise our general feeling around this, it is that all banks/lenders are expected to do the same thing, and therefore the competitive landscape is unlikely to change.

However if you would like to discuss your specific situation please feel free to call us any time on 03 9882 2500.

Why are rates increasing?

The Cash Rate has not changed since July 2016, however unfortunately (for borrowers) or fortunately (for investors) in 2018 it costs a bank/lender quite a lot more to raise the funds needed to lend to borrowers, than it did in the past.

This Australian Bureau of Statistics chart shows the margin banks make on loans over the past 18 years:

 

 

 

 

 

 

 

 

 

 

 

Much of the source of loan funds comes from deposits, and as we know, deposit investment rates (eg. term deposits) remain low, which has caused deposit growth to slow in Australia. This means banks must find other ways to source funds to meet borrower demand, including borrowing from institutions and each other.

The increasing cost of funds is also demonstrated in the Australian Bank Bill Swap Rates (BBSW):

Summary

Whilst the recent changes represent an added cost of around $40 per month on an average loan of $400,000, it is unlikely any bank or lender is immune to these cost pressures, and it is also unlikely that your loan will become unsuitable as a result of these changes.

We will continue to monitor these changes, and we are always here to answer any questions you may have about your loans. So please feel free to contact our office on 03 9882 2500 if you would like to discuss these issues.

 

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