The J.P. Morgan Australian Mortgage Industry Report has pointed to improved wholesale funding positions for Australia's banks, but analyst Scott Manning said borrowers shouldn't hold their breath for out-of-cycle cuts.
"Overall, we expect the likely wholesale funding benefits in the coming years to be largely invested in the ongoing extension of wholesale funding to replace existing maturities, increased new loan discounting or strategies to attract higher value deposits, as well as supporting the expansion of net interest margins to sustain earnings growth," he said.
Manning concedded that banks were in a stronger position, with falling wholesale funding costs providing "a modest net interest margin tailwind". But Manning said that funding costs had been elevated for some time, and that it would take a sustained improvement for the average cost of funds to come down.
"Moreover, out-of-cycle rate reductions are likely to be contingent upon improvements in deposit pricing, which we are approaching with a degree of caution," he said.
