The millions banks make from raising interest rates by 0.05% and 11 other numbers you need to know

The millions banks make from raising interest rates by 0.05% and 11 other numbers you need to know
The millions banks make from raising interest rates by 0.05% and 11 other numbers you need to know

The cost of funding mortgage lending will again become a hot topic this week regardless of the decision the Reserve Bank makes about the cash rate.

Banks will argue that funding costs are rising, and more out-of-cycle rate decisions are expected. 

However, research compiled by Nomura analysts Victor German, Prue Rydstrand and Anthony Hoo has found that apart from a “brief period in January when banks technically wrote unprofitable business” mortgages remain an “attractive asset class for the majors, on a medium-term view”. 

These are the numbers you need to know:

The estimated return banks are currently making on their mortgage lending businesses

 


 

The estimated return banks will make on their mortgage lending businesses if funding spreads normalise towards 2011 levels

 


 

 

The estimated earnings boost the major banks receive for every five-basis-point increase in their standard variable rate. On the same five-basis-point increase regional banks receive a 3% earnings uplift and a 0.25% gross profit margin benefit.

 


The estimated return Westpac is making on its mortgage lending business. The bank currently has the highest interest rate of the major banks at 7.46%.

 


 

How much extra revenue the Westpac earns by pushing up rates by five basis points

 


 

The estimated return the Commonwealth Bank is making on its mortgage lending business. The bank currently has the second-highest interest rate of the major banks at 7.41%.

 


 

How much extra revenue the Commonwealth Bank earns by pushing up rates by five basis points

 


 

The estimated return ANZ is making on its mortgage lending business. The bank currently has the third-highest interest rate of the major banks at 7.36%.

 


 

How much extra revenue the ANZ earns by pushing up rates by five basis points

 


 

The estimated return NAB is making on its mortgage lending business. The bank currently has the lowest rate of the major banks at 7.31%.

 


 

How much extra revenue NAB earns by pushing up rates by five basis points

 


 

 

The average discount the major banks are currently offering borrowers on mortgages over $500,000

 

 

Source: All numbers sourced from Nomura Equity Research

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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