Via The AFR comes an interesting development on the mortgage front:
The bank is raising rates on the popular interest-only loans because it believes it will encourage customers to pay down debt, according to brokers.
It is also discreetly lowering discounts on its showcase Flexi First Option Home Loan packages that provide loans to principal and interest, interest-only and investor loans…
A Westpac spokesman said: “The challenge for banks when interest rates fall is to balance the benefit for mortgage customers, with loan rates at record lows, with the needs of depositors and shareholders, who provide the funding for those loans. Most of our funding comes from depositors, and with the structural changes that have occurred in recent years, regulators now require us to increase our reliance on deposits and on capital, relative to wholesale borrowing. Therefore our funding costs are higher.”
From the above statement by Westpac, it sounds like APRA is trying to wean the banks off wholesale (mostly offshore) funding. If this is true, then we should expect the other banks to follow, especially the CBA, whose capital base is similarly thin:
