Why are interest rates rising but the OCR is not?

Published on 21 August 2023 at 13:05

Ever wondered why interest rates are going up while the official cash rate (OCR) remains the same? Let's dig into this financial puzzle!


Wholesale Interest Rates Shoot Up: One big reason behind this trend is the recent rise in wholesale interest rates. These rates are what banks pay when they borrow money themselves. They've gone up lately due to various reasons like changes in the global economy, worries about rising prices, and shifts in how investors feel. When wholesale rates rise, banks might need to adjust how much they charge when they lend money to keep making money themselves.


Banks Want More Profit: Another important part of the puzzle is how banks make money. When wholesale rates go up, banks can make more profit by charging a bit extra to borrowers. This helps banks make more money for themselves - great eh? But this can lead to a gap between higher wholesale rates and the OCR that's still the same.


In simple words, the connection between wholesale interest rates and bank strategies helps us understand why rates are going up even if the OCR isn't changing. This shows us how banks and the economy work together. Remember, the money world always changes, so being informed helps us make better choices about our money!


An expert mortgage advisors role is helping borrowers with strategies to protect borrowing rates during uncertainties in, what can be at times volatile, the interest rate market.


Reach out below of here for more information on this or other mortgage related questions.




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