As the Australian stock market suffered another $48 billion plunge in value yesterday -- taking its losses in the past three weeks to almost 10 per cent -- Commonwealth Bank chief executive Ralph Norris said mortgage rates were likely to rise even if the Reserve Bank did not lift official rates.
Non-bank lenders hit
Mr Norris said non-bank lenders -- companies such as Bluestone, Wizard and Aussie Home Loans -- would be more significantly affected by the credit crunch triggered by the crisis among poor-quality sub-prime home loans in the US. He said the Commonwealth had no plans to lift rates, "but the market is driven by supply and demand, and if funding costs increase significantly, then we pass that on".
The Australian revealed this week that Bluestone, hit by the higher cost of borrowing money to on-lend to its customers, had been forced to raise mortgage rates by 17-55 basis points. Other lenders, particularly those offering low-documentation loans to customers with poor credit histories, are also likely to pass on the higher costs.
Aussie Home Loans' John Symond has warned rates will rise by about 0.25 percentage points. And Mr Norris warned home-owners that he expected official interest rates to rise further after the Reserve Bank's increase of 0.25 percentage points last week to 6.5 per cent.
Aussie stock market hit by US sub-prime crisis
The sub-prime crisis continues to hurt international stock markets, with the Australian market, which took its lead from a falling Wall Street, slumping almost 3 per cent yesterday.
The benchmark S&P/ASX 200 index, which yesterday fell 176.8 points to 5788 points, is down 9.9 per cent -- just shy of the technical correction point of 10 per cent -- since its record high of 6422.3 on July 24.
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