There have been a number of recent media reports concerning the collapse of the “sub prime” mortgage market in the United States and the effect it may have on Australian lenders.

A number of non-Bank Australian lenders do not have a base of depositors from which their lending can be funded and obtain money from other sources. One of the sources has been the US market. With its recent collapse, these lenders must find other fund suppliers to continue their lending operations. The cost of these funds has increased significantly, leading to the possibility that some lenders may choose to increase their interest rates by more than the Reserve Bank's recent increase in official rates of 0.25%.

The Greater has a large deposit base on which it can draw funds to lend to its borrowers. While we do supplement this with other external funding sources, the increase in the cost of this funding at present is not significant.

As a result, there is no pressure on the Greater to raise interest rates above the RBA increase. Loan repayment increases will be delayed until September.