RBA hint may trigger bank rate rises

By Nila Sweeney

By Robert Carry

Mortgage holders may be in for a new round of interest rates hikes from their banks after the Reserve Bank of Australia (RBA) suggested that financial institutions had seen their margins shrink over the past two years.

There are concerns that the statement may be give cover to banks not committed to interest rate parity with RBA interest movements to implement their own hikes.

"Margins on variable rate housing lending relative to bank funding costs have actually declined a little over the past two years," said RBA assistant governor, Guy Debelle at a banking conference in Sydney yesterday.

According to the Sydney Morning Herald, the RBA believes private banks are paying more for money borrowed abroad and are paying considerably more for Australian deposits.