Australia’s borrowers may be hit with higher mortgage repayments by the big four banks, says one leading financial expert.
ABC News has reported that this is because of the net stable funding ratio – an international regulation to increase financial security of the banks by boosting the amount they hold in deposits.
This will decrease the reliance major banks have on overseas money markets by moving the focus to Australian customer deposits.
Speaking with the ABC, Brett Le Mesurier, banking analyst at Velocity Trade, said that the banks may need to reduce the discount they offer to certain borrowers by close to 2%.
“The banks have a standard variable rate, and then when customers go for a mortgage, they will be offered some level of discount,” he said. “The discount can be anywhere up to 1.5% or more. It may be manifested by a reduction in the rate of discount that’s being offered.”
With banks ultimately maintaining their margins, this will result in higher mortgage repayments for borrowers from as early as next year, Le Mesurier said.
“If they’re paying more for their funding, [maintaining] the margin necessarily means that mortgage rates go up.”
This will then definitely end up affecting the property market, he said. This is directly affected by two factors: unemployment and the rates people pay on their mortgages.
“If you’ve got stable unemployment but effectively rates on housing go up, that means that the price of houses fall,” he told ABC News. “Now the extent of any fall will obviously depend on the extent of any additional interest rates that have to paid.”