• LoanCaddie

Where does the lender get their money and how it impacts the future changes their variable rates?


Most of the money lenders have (up to 95%) doesn't belong to them.  All lenders (including the major banks) have borrowed the money they lend to you from either deposit accounts or bondholder in the wholesale capital market.  Some lenders even get their money from other lenders.  The interest rate lenders pay changes regularly and directly impacts the cost they need to pass on to you in their variable rate. 

The lenders source their money impacts the likelihood and size of future variable rate changes.


You can expect that lenders who source fewer funds from the wholesale capital market will have smaller changes in their variable rate. 


A ranking of the types of lenders with least to the most reliance on the wholesale capital market is as follows.

  • Foreign banks (e.g. Citibank, ING, Bank of China)

  • Domestics banks 

  • Non-banks (i.e. lenders with no deposit accounts, e.g. loans.comau, Resimac, Firstmac, Bluebay, BetterChoice)


A recent study by the RBA has confirmed that increases in the cost from the wholesale market in 2018 impacted non-bank (or Non-ADIs) more than the others.  See Chart 1.