Australian banks — which made bumper profits last year — are facing soaring funding costs as they need to repay $188 billion of cheap money borrowed from the Reserve Bank in the coming years, which is bad news for home loan borrowers.
As the costs of bank funding rises, mortgage interest rates will likely rise as banks seek to recover their increased costs.
Canstar group executive financial services Steve Mickenbecker said banks were yet to be under the same pressure as smaller, non-bank lenders were, because they have large savings account balances at their disposal. Steve Mickenbecker says the build-up of savings balances over the past few years has put the banks in a very strong funding position.
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