THE Australian Bankers' Association said banks still face high wholesale funding costs due to United States sub-prime crisis.
“When the term of any funding arrangement expires, banks have to re-finance or rollover their wholesale funding in a market which is volatile and where the cost of those wholesale funds has increased significantly over the past year.
“Due to the protracted nature of the sub-prime crisis, now into its 11th month, pressures in financing from the wholesale market will continue to persist,” he added.
“In the early months of this crisis, banks took a conservative approach and did not pass on to customers any of the increases in the wholesale funding costs, as they wanted to understand whether the changes being experienced were going to be sustained.
“The simple fact is that banks, like any other businesses, have to adjust their prices when their cost base significantly increases,” he continued.
Gilbert said it is premature to question competition in the housing loan market.
“We are, after all, in the midst of a volatile global financial environment which is impacting on all financial institutions and their lending markets. It is important to note that all institutions, including banks, are being affected by significantly slower loan volume growth.
“Competition between the banks, more than 150 credit unions and building societies, and other lenders continues,” Gilbert concluded.
Australian Property Journal
