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Funding costs to push rates higher: CBA

Staff Reporter 4 minute read

Brokers can play a critical role in informing their clients of the impact of the higher funding costs that are likely to push mortgage rates up further, according to CBA.

At a media briefing yesterday, Kathy Cummings, executive general manager of third-party banking, told journalists that the bank was working with its Diamond brokers to help them prepare clients for a rising rate environment.

CBA’s current initiatives to support borrowers will include a video presentation produced for CBA’s Diamond brokers in which Lyn Cobley, group treasurer, highlights the impact of today’s higher funding costs on both variable and fixed rate loans.

In the video, shown to journalists, Ms Cobley explains why the bank’s funding costs bear little relationship with the cash rate. She also reveals that while 58 per cent of the banks funds originated from deposits, a cut-throat market had also pushed up costs in this sector.

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According to Ms Cobley, the remaining 48 per cent of funds were secured from institutional investors where costs had risen from less than 20 basis points in June 2007 to 112 basis points in June 09. She said that this is forecast to reach 136 basis points by June 2010.

Kathy Cummings explained to journalists that while the threat of recession in Australia has now receded, borrowers should be aware that the global financial crisis still grips the capital markets.

She believes that with a better understanding of the wholesale markets brokers will be well positioned to help their clients navigate the next phase in the rate cycle.

“Brokers have a major role to play in helping their clients borrow responsibly and that means keeping them informed about the realities of the current wholesale funding environment and how that could impact on their mortgage.”

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Funding costs to push rates higher: CBA
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