(12 October 2010 – Australia)The chief executive officer of Westpac Banking Corporation, Gail Kelly, has warned that mortgage rates will rise to counteract high funding costs induced by the global financial crisis.The era of cheap credit is over and interest rates ‘are going to go up’ to counteract high funding costs induced by the crisis, Ms Kelly said in Sydney yesterday.
Mrs Kelly, speaking from a business lunch, said that funding costs had gone up very materially as a direct consequence of the global financial crisis, adding that an “excess supply of money was gone”.
The Westpac bosses comments coincided with the release of data showing that loans from all lenders for the construction of housing continued to fall for the 10th straight month in August.
The latest statistics mark the longest decline since records began in 1975, this coupled with data published yesterday from the Australian Bureau of Statistics (ABS) revealing that the percentage of total mortgage lending to first home buyers had reached a low not seen since mid-2004, indicates a market tightening.
Ms Kelly said Westpac needed to retain its AA credit rating and higher rates were a trade-off.