Most Australians have been disappointed that almost all lenders have decided to retain some or most of the RBA’s cash rate cut to offset significant increases in other costs of doing business. While the RBA cash rate is one cost that affects how banks set interest rates, there other costs which are increasing.

The cost of retail deposits as a source of funding for loans (deposits from everyday Australians) has increased significantly over the last year and these will continue rise further over the next 18 months as banks meet new legislation that require them to source more funds from longer-term retail deposits. This will drive up market demand and interest rates for deposits. This is particularly true for almost every lender that we have a relationship with. As lenders attempt to maintain deposit rates that are competitive in a tough market a fine balancing act will need to be maintained. Another increased cost is funding from money markets – ‘term securitisation’ and ‘warehousing’ – which have also risen sharply over the last 7 months.

Like any business, banks need to adjust prices when input costs rise and we believe lenders are trying to strike a good balance between a cut to the cash rate and rising funding costs. We will continue to monitor the situation and provide updates on relevant events as they happen. We are more than happy to review your situation at any stage with a view to getting you a better deal. We have had a lot of fantastic outcomes that have seen our clients either swap to another product or lender and made significant savings.

Talk to us today about your situation on 1300 861 143.

The information provided here has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither we nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.