More out of cycle rate hikes to come

Jessica Darnbrough

The majors' recent out of cycle rate movement could be the first of many, one industry stakeholder has claimed.

Speaking to Real Estate Business' sister publication, The Adviser, Advantedge's Brett Halliwell said the costs of funds had risen "significantly" for Australia's lenders, putting pressure on their margins and thus forcing them to lift rates independently of the Reserve Bank.

Advantedge is a wholesale loan servicer, which is owned by NAB.

On Monday, NAB and CBA became the last of the majors to move their rates out of cycle with the RBA, with CBA lifting the interest on its standard variable rate by 10 basis points, while NAB lifted its rates by 9 basis points.

Mr Halliwell said these out of cycle rate movements weren't surprising given the current state of the wholesale funding markets.

"The turmoil that we are seeing in Europe is having a negative impact on ever sector across the globe, particularly the financial sector," he said.

"The problems in Europe have in turn ensured that the cost of funding from wholesale markets globally has gone up.

"In recent months, bank CEOs have been discussing the disconnect between the RBA's cash rate and their variable rates. The reality is, bank rates are not driven by the RBA, they are an element, but the overall cost of funding has gone up which means we could see the banks move out of cycle a few times in order to ease the pressure on their margins."

Mr Halliwell's comments have been supported by the RBA.

Speaking at a Bloomberg seminar in Sydney yesterday, the RBA's assistant governor, Guy Debelle, said the cost of bank debt had risen since the middle of last year, affecting both unsecured debt and covered bonds.

''Investors are demanding much higher compensation for bank credit risk now than they were in mid-2011,'' Mr Debelle said.

''This global repricing of bank debt has clearly affected the Australian banks' wholesale funding costs."

Jessica Darnbrough

The majors' recent out of cycle rate movement could be the first of many, one industry stakeholder has claimed.

Speaking to Real Estate Business' sister publication, The Adviser, Advantedge's Brett Halliwell said the costs of funds had risen "significantly" for Australia's lenders, putting pressure on their margins and thus forcing them to lift rates independently of the Reserve Bank.

Advantedge is a wholesale loan servicer, which is owned by NAB.

On Monday, NAB and CBA became the last of the majors to move their rates out of cycle with the RBA, with CBA lifting the interest on its standard variable rate by 10 basis points, while NAB lifted its rates by 9 basis points.

Mr Halliwell said these out of cycle rate movements weren't surprising given the current state of the wholesale funding markets.

"The turmoil that we are seeing in Europe is having a negative impact on ever sector across the globe, particularly the financial sector," he said.

"The problems in Europe have in turn ensured that the cost of funding from wholesale markets globally has gone up.

"In recent months, bank CEOs have been discussing the disconnect between the RBA's cash rate and their variable rates. The reality is, bank rates are not driven by the RBA, they are an element, but the overall cost of funding has gone up which means we could see the banks move out of cycle a few times in order to ease the pressure on their margins."

Mr Halliwell's comments have been supported by the RBA.

Speaking at a Bloomberg seminar in Sydney yesterday, the RBA's assistant governor, Guy Debelle, said the cost of bank debt had risen since the middle of last year, affecting both unsecured debt and covered bonds.

''Investors are demanding much higher compensation for bank credit risk now than they were in mid-2011,'' Mr Debelle said.

''This global repricing of bank debt has clearly affected the Australian banks' wholesale funding costs."

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