Since December, banks have been raising rates as they turn the focus to marginsHome loan interest rates charged by the major banks to new borrowers are outpacing official cash rate increases, as lenders shift from writing mortgages at below the cost of capital to safeguarding profits and dividends.
“We are definitely seeing a shift towards banks managing margins over volume growth over the last six months,” said Finspo chief executive Angus Gilfillan. “The big banks are doing some heavy lifting for the RBA on new loans. I expect the trend to continue over the next few months.”– will release pressure on the RBA as it comes to the end of its fastest monetary policy tightening cycle on record. There is a growing expectation that the cash rate will be left unchanged at 4.
While uncomfortable for borrowers, the higher rates will be welcome news to bank investors, who put pressure on lenders this year for eroding profitability by writing new loans below the cost of capital at ultra-competitive prices in a sagging home loan market.Macquarie’s analysts told clients late last week that the better earnings expectations for the big banks had seen institutional investors close underweight positions, driving recent share price outperformance.
Source: Loan Digest (loandigest.net)
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