CommBank says mortgages have been losing money

Commonwealth Bank chief executive Ian Narev confirmed that prior to the bank’s decision to raise home loan interest rates it was writing mortgages at a loss.

Narev said the bank’s move in the past week to increase variable home-loan rates by 10 basis points will only recover part of the cost increase of the past six months. However, he rejected any suggestion that the bank would ration household credit.

Since June 2007, the bank’s cost of wholesale funds has gone up by 45 basis points. The cost of deposits has gone up by 12 basis points over the same period. Narev said: “In this interest rate environment home loans are not as profitable as they were. But we have an appetite to grow in that market. We are not rationing.”

Source: Banking Day