Regulatory Alerts2026-05-28
Added · Updated
Developments in Banks' Funding Costs and Lending Rates
The Reserve Bank of Australia reports that major banks' funding costs declined relative to the cash rate in 2025 due to a significant drop in interest rate hedging costs, while lending rates moved broadly in line with policy changes. This divergence caused the estimated spread between lending rates and funding costs to widen, although net interest margins remained at historical lows amid competitive pressures. The analysis highlights that deposit and lending rates fully passed through cash rate reductions in 2025 and increases in early 2026, with the share of fixed-rate housing loans falling to a historic low.
Topics
credit
monetary
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