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Date Published : Friday, December 28, 2007
Borrowers who have taken out loans with conforming lenders could face higher rates of interest next year, it has been claimed.
Investment bank Merrill Lynch told news.com.au that it expects an increasing number of banks to take the step as the lending conditions tighten.
Already, a number of these institutions have indicated that the level of interest charged on their variable rate products could be raised in order to limit any potential damage done by the credit crunch.
For example, National Australia Bank said last month that it may be forced to act in the coming weeks.
Commenting on the possibility of higher rates, Merrill Lynch's lead banking analyst Matthew Davison said that other banks could well follow suit.
"I think the credit market's deteriorated to the point where most of the players would do the same thing - and they'll probably do it early next year,'' he forecast.
However, Credit Suisse is less convinced that the major institutions will be inclined to increase rates.
A spokesman for the international financial services group said that the "first mover disadvantage" factor will deter many from pressing ahead with the proposals.
At the last monetary policy meeting of the Reserve Bank of Australia, it was decided to maintain interest rates at 6.75 per cent.
The decision was made amid caution over inflationary pressures in the country. Members of the committee acknowledged that there was a strong case for increasing the rate, though it was adjudged wiser to leave any action until the next meeting.
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