CoreLogic: Banks’ mortgage rate rises to prolong housing pain

From Cameron Kusher at CoreLogic:

Over the past few weeks three of the four major banks in Australia have announced that they are going to be increasing variable mortgage rates. While there has been a lot of adjustments to mortgage rates over recent years, the big difference with the latest announcement is that the higher mortgage rates are going to affect owner occupiers. Most of the previous mortgage rate changes announced by the major banks have only affected investors and those with interest only mortgages.

Many of the smaller regional banks have pushed mortgage rates for owner occupiers higher over recent months citing higher short-term funding costs. Although until now the major banks had resisted making an adjustment to mortgage rates it seems they too have had their hand forced by higher funding costs. The above chart highlights the cost of short-term funding to banks (the three-month bank bill swap rate) and it clearly shows that the cost of short-term funding has increased. It currently sits at 2.26% compared to the official cash rate which remains unchanged at 1.5% since August 2016…