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Banks will defy Swan and raise rates

10/02/2010

Big banks are likely to defy the federal government and raise interest rates on their standard variable mortgage products by significantly more than rate movements imposed by the Reserve Bank say analysts.

The treasurer Wayne Swan announced on the weekend that the federal government would end the government guarantee for wholesale bank debt at the end of March 2010. That decision effectively gives banks a reason to expand their rate margins despite warnings not to do so by the federal government.

Additionally banks face new liguidity requirements that will take funds that would otherwise go to bank profits. Macquarie banking analyst Tom Quarmby said if banks are likely to raise rates by a lot more than the RBA’s guidance because if they are going to face the public's wrath, they need to make it worth their while, he said.

Source: Sydney Morning Herald



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