Australian Banks Expected To Start Hiking Mortgage Lending Rates

Post by Sharat on May 7, 2018 · Under loans · Comments Off on Australian Banks Expected To Start Hiking Mortgage Lending Rates 

ME, the online lender has decided to raise the interest rate on its variable rate mortgages because it says funding costs have risen. ME is not the first bank to do this, nevertheless the lender hiked its standard variable rate for owner-occupier, principal and interest borrowers. Jamie McPhee CEO of the online lender said higher funding costs and increased regulatory compliance were the main reasons behind its decision to hike rates.

Funding costs are rising

Mr MchPee says over the last few months the bank has seen funding costs steadily rise in response to US interest rates that have been passed on to short term Australian interest rates. Simultaneously, regulatory requirements and industry reforms means that compliance costs are rising as well. ME’s decision follows on the heels of Suncorp which raised its rates in March and also cited higher funding costs as the reason behind its decision.

Expect more rate hikes to follow

Suncorp Banking & Wealth CEO David Carter echoed Mr Mchpee’s comments and said that since the end of October funding costs have been steadily rising and domestic factors have not been helpful either. Experts have been expecting pressure on funding costs to produce a raft of hikes for quite a while now and borrowers should expect more hikes in the future. As the cost of obtaining funding overseas increases experts are warning that a number of banks are going to hike their home loan rates over the coming months.

Perhaps opt for a fixed rate deal

It has been an incredibly low interest rate environment for many years now. The RBA has not hiked Australian interest rates since November 2010. However, the central bank has signalled its intention to begin hiking the cash rate again, whilst the US Federal Reserve has already embarked on its tightening policy. Australian interest rates are currently at rock bottom and that cannot possibly last forever experts add. What this means is if you are borrowing or planning to refinance you existing mortgage, you should shop around for a low rate option and perhaps even lock in a fixed rate deal.

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