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NON-conforming home loan lenders are considering hiking interest rates on their variable rate products even further in the new year to offset the cost of the credit crunch, an aggregator says.

Many non-bank lenders rely on generating their funding from securitised debt markets, which are still frozen overseas and barely active in Australia as the cost of funding rises.

Non-bank lenders like Liberty Financial, Pepper Home Loans, RHG Group (formerly know as RAMS Home Loans Group Ltd) and Bluestone Group have already been forced to lift rates on their variable rate loan products independently of recent movements by the Reserve Bank of Australia.

Non-conforming mortgage aggregator BlueChoice managing director Jacque Aho said yesterday he had witnessed a big jump in the rates that non-conforming lenders charged, and indicated there could be more increases to come.

“There’s a bigger gap between conforming and non-conforming loans _ it’s not just a matter of half a per cent or 1 per cent any more,” he said.

Without naming any companies, Mr Aho said some of Australia’s biggest non-bank lenders had indicated to BlueChoice recently in meetings that they were reviewing their rates.

“In our meetings they’ve said they’re actually bringing out a new matrix maybe at the end of January,” he said cash advance loan.

Non-conforming lenders are under less pressure to keep rates low because they can’t compete with traditional, big lenders like banks.

But even the major banks, which can fund part of their loan books from deposits, are thinking about passing the cost of the credit crunch onto their variable rate home loans customers.

National Australia Bank (NAB) and Commonwealth Bank of Australia have said such a move is “inevitable”.

The other three big banks _ Westpac Banking Group, ANZ Banking Group and St George _ have indicated it’s a possibility.

NAB said on November 9 it would act “in the next month or two”.

Most market watchers still expect all the banks to move in line with NAB early in the new year.

Merrill Lynch lead banking analyst Matthew Davison said the credit market had deteriorated to the point where most of the players would do the same thing, and that they would probably do it early next year.

However, Mr Davison’s counterpart at Credit Suisse believes there is still a possibility the major banks will hold steady.

“There’s been lot of sabre rattling and rhetoric, yet no one seems willing to go the distance,” he said.

“And that’s understandable given there’s a first mover disadvantage.”
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Filed under: Loans, banks, finance, homeowners, lenders, mortgage by Finance Boss