Interest rate rise warnings begin to stack up

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Another prominent voice in the mortgage industry has warned borrowers to brace themselves for additional interest rate rises in the near future.

Peter White, chief executive officer of the Finance Brokers Association of Australia (FBAA) believes current regulatory requirement and funding costs faced by Australian lenders combined with other factors such as the rising Australian dollar have created conditions that are ripe for a rate rise.

“This is really the perfect storm for interest rate rises as banks look at softening the jump in the wholesale cost of funds that they lend out, like mortgage-backed securities and bonds,” White said.

“Those with money deposited in banks should be happy their interest rates have risen slightly but the flipside is the borrower will possibly have to carry the cost with an increase in home loan mortgage rates,” he said.

White’s prediction follows that of John Kolenda, head of mortgage broking network 1300HomeLoan, who made a similar prediction earlier this week.

“Mortgage holders can expect to be hit again by lenders because of their additional current funding, compliance and provisioning costs,” Kolenda said.

“With continued global economic uncertainty banks have recently seen their cost of funding increase and unless that eases they will have no choice but to pass those increases onto consumers,” he said.

Kolenda said future rate rises are likely to be similar to those seen last year when lenders increased variable rates by up to 0.29% and investor loans by up to 0.49%.

While the rate rises will mean a hit to the back pocket of mortgage holders, Kolenda said regulators are trying to strengthen Australia’s banking system.
“The Australian Prudential Regulation Authority wants to make our banks the safest in the world by enforcing new regularity requirements that will increase the cost of providing mortgages.” 

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