All of the Big Four banks (and a host of second tier and non-bank lenders) have recently announced increases in interest rates on investment and owner occupier loan interest rates despite the RBA holding steady on the official cash rate.
We have seen increases in rates ranging from a few basis points to over 25 basis points.
The banks are advising that these mortgage rate rises are to compensate for higher funding costs and the banking regulators 10% speed limit cap on investment lending designed to slow down the booming Eastern States residential property market.
What we are seeing play out is basic economics of demand and supply. Demand for investment funding is greater than supply, thereby enabling the suppliers to increase their price.
There’s no doubt that the banks have been ruthlessly fighting for market share with ultra-competitive mortgage loan pricing however this competition is easing and along with it the discounting on mortgage loan interest rates.
The divergence between lenders services, product offerings, fees and interest rates is now widening and now more than ever consumers and business owners are well advised to seek expert credit advice from a Broker to help demystify the current banking market.
Despite many Economists expecting official interest rates to remain at current levels we think there will continue to be upward pressure on mortgage and business finance costs.