Following speculation that central interest rates could be lowered again for the second consecutive month, the CBA suggests that it could be time for banks to rein in.
The Commonwealth Bank has warned that the pressures of rising funding costs may lead to less attractive rates for consumers. In a troubling sign for mortgage and savings account holders alike, the bank described itself as "not immune" from the Eurozone debt crisis. Chairman David Turner said that he expected funding costs to rise as credit markets "become more challenging".
CBA predicts lower growth in the upcoming year as it prepares to deal with higher borrowing costs and lower levels of confidence.
"Fundamentally, it comes down to confidence, and it's confidence that will encourage both individuals and corporations to invest for growth", Mr. Turner added.
Savers and mortgage holders may struggle to accept higher mortgage rates or more meagre returns on savings. CBA, the country's most profitable bank, reported a record net profit of $6.84 billion for the year to June 2011, a 12% increase on the $6.1 billion from the previous year. Collectively, the major banks have accumulated profits of over $24 billion over the past year.
It remains to be seen exactly who will stomach the burden of these predicted financial shortcomings. One advantage for consumers, though, is the new law banning mortgage exit fees. This will encourage banks to remain competitive in the knowledge that consumers can now withdraw their mortgages and transfer to a better deal without financial penalty.
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Kate Guthrie
