Rate discounts may dry up

The deputy governor of the Reserve Bank of Australia has warned that some lenders may not be able to continue offering discounted mortgage rates as the cost of lending rises. Mr Battellino said, “My guess is if these funding pressures continue, some of that downward pressure on home lending rates is going to be reversed because the lenders won't be able to offer the discounts they've been having”. He went on to say that it is the lenders that rely on wholesale funding instead of retail deposits that were most likely to feel the rate squeeze. Some lenders have already increased their variable rates by as much as 0.80 percentage points this month.