Mortgage interest rates in Australia could increase regardless of the action taken by the Reserve Bank of Australia (RBA). A lack of liquidity in money markets has resulted in higher interest rates for commercial lending products, which diminishes the need for the RBA to raise official rates. The cost of funds in the wholesale markets has increased above 7%, compared with the central bank's target of 6.5%, which places pressure on banks and non-bank lenders to pass on the higher costs to consumers through increased mortgage rates.
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