Why lenders are moving rates
The last 6-12 months has seen lenders move their standard variable home loan lending rates independently to the RBA movements. The RBA drops 0.25%, some lenders move only 0.10%. The RBA doesn't move rates and some lenders still see fit to increase their rates.
Banks operating in Australia raise money to lend out in a combination of 3 main ways
This means that there has been a significant increase in the cost of funds being raised by lenders. It has been this increase that has led to lenders moving their borrowing rates independently to movements in the RBA cash rates.
To read some more articles – see
RBA June 2009 Bulletin
Banks operating in Australia raise money to lend out in a combination of 3 main ways
- Bank deposits – 40%-45% of money raised comes from bank deposits - this is money put in the bank by households, organisations (corporate, co-ops, not for profit companies) and governments
- Equity – this is money raised through the issue of shares to investors and money generated through earning profits
- Borrowings in Capital Markets - Just under half of banks’ funding comes from capital markets, with a little more funding raised offshore than domestically. About three-quarters of domestic capital market funding is short term, whereas most offshore capital market funding is long term. A further 4 per cent of banks’ funding comes from securitisation; the vast bulk of assets that are securitised are housing loans.
This means that there has been a significant increase in the cost of funds being raised by lenders. It has been this increase that has led to lenders moving their borrowing rates independently to movements in the RBA cash rates.
To read some more articles – see
RBA June 2009 Bulletin
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