Major Australian Lenders Raise Fixed Rate Mortgage Borrowing Costs

Post by Sharat on October 26, 2009 · Under Australian Economy, Business News, banking, home loans, interest rates, mortgages · Comment

Australia’s major banking groups have raised interest rates on their fixed rate mortgages, a week ahead of a scheduled Reserve Bank of Australia meeting, the outcome of which is considered to be an almost certain further increase in the official cash rate.

Fixed rate mortgages tend to fluctuate depending on funding costs of the banks on wholesale markets, and are less dependent on official interest rate moves, since lenders typically finance fixed rate mortgages with similar termed funding.

On Monday, National Australia Bank says it will raise its one to five year fixed rate mortgages by between 20 to 50 basis points. NAB’s move mirrors those of its rivals Westpac, CBA and ANZ.

CBA, which raised its fixed rates by 25-45 basis points, blamed the increase on funding costs.

Lenders have faced intense pressure from critics to explain their claims that funding costs continue to rise, when market conditions have stabilised and investors have returned.

The Reserve Bank of Australia has begun tightening interest rates, after having previously cut rates to nearly half century lows in response to the global financial crisis.

Inflationary concerns now drive the central bank’s decision making.

Minutes of the last RBA board meeting, published this week, said the board decided it would be “imprudent” to leave the cash rate at its 50-year low.

This sparked speculation the BRA could lift rates again, possibly by as much as 50 basis points, when the board next meets on November 3.

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