Cost of Lending Trends

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As a result of the Banking Royal Commission, we’ve seen some of the majors adjust their base lending rates ‘out of sync’ with the Reserve Bank. Westpac only recently increased their lending rates by 0.14 percentage points, but the Reserve Bank held the official cash rate at 1.5 basis points.

So why are banks increasing their mortgage rates while the Reserve Bank keeps rates on hold?

There are lots of different views out their and many point to the increasing costs of wholesale lending. What is wholesale lending? Wholesale lending or banking are services provided by banks to large corporations.  An example is a mortgage broker group. The banks provide lending services, the same as the services provided to individuals, but on a much larger scale.

Others say its’ the Trump factor. America’s economy has improved, their interest rates are rising, and this in turn is increasing the costs of loans to our banks in Australia. To recover these costs, the banks must increase their rates.

What’s your view? How are these ‘out of sync’ interest hikes affecting your business?

Regardless of the reason for rates increasing, this is putting pressure on individuals and businesses and may require some cost reductions in other areas.

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