The high cost of funding is putting increased pressure on Australia’s big banks, however lenders are waiting for government to call an election before they raise rates.
According to the Sydney Morning Herald, bank executives are waiting for the election to pass before making rate rises outside of Reserve Bank movements.
A recent Macquarie Equities Research note to clients also said the economy would be in a post-election environment soon, making it easier for banks to reprice their mortgage rates.
The note, entitled "It's not a vice to reprice", said a recent slump in bank stocks had partly been a result of the impact of increased funding costs, as well as fears of a tax on bank profits and concerns over dividend growth, according to the Australian Financial Review.
Speculation is mounting that the federal government is close to calling an election, in which case borrowers could be faced with rate increases in two months time. Banks waited just two months after the 2007 election to increase rates.
Banks raised rates outside of RBA movements in late 2009, but faced intense criticism from government. BusinessDay reported earlier this year that banks had become more sensitive to political pressures when pricing mortgages, as they feared politicians would seek a “social dividend” in the build-up to the election.
While the RBA has kept the official cash rate on hold at its last two meetings, it is expected to increase the cash rate again this year to curb inflation.
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