Costs of funding home loans is increasing. It’s looking more and more likely that the RBA will raise interest rates this year. Below is an extract from an email send by one of my lenders (not an isolated case).
As always, if you would like to discuss your current situation, call John Kraws from Zoom Home Loans on 0402 894 821.
Begin Extract
In recent months, there has been a sharp increase in the cost of funding for Australian home lenders that has been driven primarily by the US Government borrowing money to fund the Trump tax cut program.
Essentially the US Government is competing with and crowding out other borrowers.
The situation was summarised by Reserve Bank of Australia Governor Philip Lowe in his statement earlier this month:
“Conditions in US dollar short-term money markets have tightened over the past few months, with US dollar short-term interest rates having increased for reasons other than the increase in the federal funds rate. This has flowed through to higher short-term interest rates in a few other countries, including Australia.”
The one month Australian Bank Bill Swap Rate (BBSW) is the base rate that establishes _____’s cost of funding. The sharp increase in the BBSW can be seen below.
For this reason, the interest rate on all new, pipeline, and existing _____ home loans will increase by the following amounts:
| Loan Type | Principal & Interest | Interest Only |
| Owner Occupied | +0.14% | +0.14% |
| Investment | +0.24% | +0.24% |
- Rates on new and pipeline loans will increase effective 9th May, 2018
- Rates on existing loans will increase effective 23rd May, 2018
- Repayments will start at the new rate on 1 July, 2018
This is a step that we have taken reluctantly because we want to ensure that our customers enjoy the best possible rates at all times.
However, after bearing higher funding costs since the start of the year in the hope that they would fall, it has become clear that this is unlikely to happen and the current situation is unsustainable.
As the above graph indicates, the Bank Bill Rate has increased by approximately 0.30%. _____ is absorbing some of this increased cost and is not passing on all of this market increase.
Letters to your customers are being posted shortly to inform them of this change and a notification will also be issued on our online services portal _____.
As always, if you would like to discuss your current situation, call John Kraws from Zoom Home Loans on 0402 894 821.