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Westpac warns of rate hikes

by Staff Reporter9 minute read
The Adviser

By: Staff Reporter

Westpac has said interest rates will continue to climb steadily over the next five years.

According to a report in The Australian Financial Review, Westpac’s chairman Ted Evans said Australians would have to become accustomed to the fact that the majors would continue to lift interest rates, including rises outside those made by the Reserve Bank.

Mr Evans said the bank’s cost of funding was rising all the time, as cheaper funding rolls off the books.

“Yes we can do it [raise wholesale funds] now without the guarantee, but that’s because of the way international markets have normalised and so long as that doesn’t change we’ll do it,” he said.

“But we’re doing it at very much higher rates than what we’re replacing, so we are replaying money that could have been borrowed anything up to seven years ago at very low margins and – even though the margins we’re borrowing at now are lower than they were 12 months ago – they’re very much higher than they were seven years ago.”

And whilst ever the cost of funding is on the rise, Mr Evans said interest rates will do the same.

“The replacement means that we’re pushing the average funding cost up all the time and that will go on, it’s got to go on for at least five years, because our book’s longer than that. Unless international margins were to come down where they were way back then, and they show absolutely no sign of doing that, the cost of money has gone up and that’s a simple fact.”

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