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CBA, Westpac tipped to raise rates first

13/08/2010

Commonwealth Bank, followed by Westpac are expected to move first to raise interest rates on their standard variable mortgages after the federal election on August 21. Citi analyst Craig Williams said while an out-of-cycle rate rise would be unpopular, the banks with the largest residential home lending books, the CBA and Westpac, would feel the most margin squeeze.

Westpac has a $250bn mortgage book, including St George, while CBA's is worth about $290bn. "CBA and Westpac are bigger mortgage banks so are feeling more pressure on the current inability to reprice," Mr Williams said. CBA chief executive Ralph Norris said the bank's cost of funding on an average mortgage would rise by 40 basis points (0.4 per cent) in the next year.

Source: The Australian



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