Cost of funding issues are likely to again force Australia’s major banks and lenders to lift their interest rates out of cycle from cash rate movements by the Reserve Bank of Australia (RBA), says mortgage broker network 1300HomeLoan.

Despite the possibility of the RBA lowering its record low 2.0 per cent cash rate in response to the rising Australian dollar, the central bank’s actions could be negated by the major banks raising their rates.

Mortgage holders can expect to be hit again by lenders because of their additional current funding, compliance and provisioning costs.

With continued global economic uncertainty banks have recently seen their cost of funding increase and unless that eases they will have no choice but to pass those increases onto consumers. These have been confusing times for borrowers with banks lifting rates outside of the RBA’s deliberations and this looks like being the new normal going forward.

We saw variable rates last year increased by up to 29 basis points and investor loans by up to 49 basis points. There is likely to be similar increases across the board for owner occupier and investor loans in the months ahead. While the RBA has plenty of room to cut its cash rate again, its actions are expected to be made redundant by the banks lifting their rates out of cycle.

Banks are also under pressure to comply with a regulatory increase on reserves by the end of June this year and this has been a contributor to the recent out of cycle increases.

More may follow around this issue as banks start to see the additional financial costs flow through.

This is the first time in history we have seen multiple triggers at play outside the RBA’s control that is forcing rate movements and competing with their directions. The Australian Prudential Regulation Authority (APRA) wants to make our banks the safest in the world by enforcing new regularity requirements that will increase the cost of providing mortgages.