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Developments in Banks’ Funding Costs and Lending Rates

Author

Listed:
  • Kelsey Wilkins

    (Reserve Bank of Australia)

  • George Gardner

    (Reserve Bank of Australia)

  • Blair Chapman

    (Reserve Bank of Australia)

Abstract

This article updates previous Reserve Bank research on how developments in the composition and pricing of banks’ funding have affected their overall cost of funds and influenced lending rates. Major banks’ outstanding funding costs fell notably in 2015, following two reductions in the cash rate. The spread between the major banks’ outstanding funding costs and the cash rate also narrowed over 2015. This was due to lower costs of deposits and a more favourable mix of deposit funding, as well as lower wholesale funding costs. Lending rates declined in the first half of 2015, reflecting changes in the cash rate and competition for lending, before lending rates increased for housing in the second half of the year; business lending rates are at historically low levels.

Suggested Citation

  • Kelsey Wilkins & George Gardner & Blair Chapman, 2016. "Developments in Banks’ Funding Costs and Lending Rates," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 21-30, March.
    • Handle: RePEc:rba:rbabul:mar2016-03
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2016/mar/pdf/bu-0316-3.pdf
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    References listed on IDEAS

    as
    1. Eduardo Tellez, 2015. "Developments in Banks' Funding Costs and Lending Rates," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 55-62, March.
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    Cited by:

    1. Holland, Quynh Chau Pham & Liu, Benjamin & Roca, Eduardo & Salisu, Afees A., 2020. "Mortgage asymmetric pricing, cash rate and international funding cost: Australian evidence," International Review of Economics & Finance, Elsevier, vol. 65(C), pages 46-68.

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