ANALYSIS: Your bank might be putting its interest rate up by more than it needs to. Here's why
And there's one more rate to know about: the Bank Bill Swap Rate, or BBSW.
In the past, it would just say the "cash rate" is such and such , because it knew it could move the rate in the market without any problem. And the BBSW would be roughly the same. My point here is that one key ingredient in that model is open to exploitation – that is, the difference between the cash rate and the cash rate target, and the BBSW.Both were below the RBA cash rate target of 0.35 per cent, after roughly 48 hours of market movements.
In other words, they are each raising what they charge borrowers on their variable mortgage rate products by 0.25 percentage points or 25 basis points. That's higher than the actual increase in the cost of funds which is 18.5 basis points. "You could say they're looking for a cheeky margin expansion there," he says. "And why not? If they can get away with it, good luck to them."