The big four have more room to move on home loan rates then their non-major rivals, according to the RBA.
Developments in Banks’ Funding Costs and Lending Rates, produced by Benn Robertson and Anthony Rush in the RBA’s domestic markets department, says a tougher funding environment exists for non-major banks compared with the big four, despite the fact overall funding costs have dropped across the sector along with falling interest rates.
“For the regional banks, the evidence suggests that the overall increase in funding costs since the onset of the global financial crisis has been larger than the increase in funding costs experienced by the major banks.”
“A large portion of this increase has been driven by the substantial shift in the composition of regional banks’ funding liabilities away from securitisation and towards relatively more expensive deposit funding, as well as an increase in the cost of their deposits and wholesale debt funding.”
Furthermore, say Robertson and Rush, new mortgage customers were able to get greater discounts last year than they are now.
“During 2012, the average interest rate on outstanding variable-rate housing loans rose by about 40 basis points relative to the cash rate. This increase is consistent with the overall increase in banks’ funding costs. By contrast, the average interest rate on new variable-rate housing loans increased by around 35 basis points relative to the cash rate, reflecting a small increase in the average size of discounts offered by banks to new customers, as competition for mortgage lending remained strong throughout the year.”