Banks raise cheap wholesale funding ahead of Spring mortgage surge

In its latest quarterly survey of financial institutions, KPMG notes that Westpac launched a five-year medium-term note issue in July, notionally seeking $100 million but with unlimited oversubscriptions and managed to sell $900 million at an interest rate of 2.22 percent.

After the Reserve Bank’s surprise 50 basis point cut to 1 percent of its official cash rate in early August, ASB Bank launched a five-year bond, also seeking $100 million, but managed to raise $600 million at 1.83 percent.

“Being able to lock in such low levels of funding should help fuel the competitive fires ahead of the traditionally active Spring mortgage market, with the possibility of further record-low mortgage rates being offered,” KPMG says.

The big four Australian-owned banks, Kiwibank and the Cooperative Bank are all currently offering two-year fixed mortgages, the most popular term, at the “special” interest rate of 3.59 percent, according to the GoodReturns website.