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Banks may lift rates despite RBA decision

by Staff Reporter7 minute read

By: Staff Reporter

While the Reserve Bank decided to leave the official cash rate unchanged when it met yesterday there is once again speculation that funding costs will force the hands of banks to increase their mortgage rates.

Dean Rushton, chief operating officer of Loan Market, said he expected the banks to lift their interest rates soon. External markets and roll-over cheap funding were continuing to put pressure on the cost of funds, he said.

“Even their traditionally cheaper sources of funding such as deposits are now more expensive due to the intense competition for deposits in the Australian market,” he said.

“The precedent has been set and there is a likelihood the banks will have to do this again, most likely after the August 21 election.”

In the past two months, new funding costs have risen, on average, 0.2 to 0.8 percentage points – at the same time the RBA has kept rates on hold.

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