No windfall in banks' funding costs

The JPMorgan report said that if banks chose to pass on the fall in their funding costs to customers, borrowers would only get an interest rate cut of about 0.1 percentage points.

The article notes that the cost of new wholesale money has slumped this year to its lowest level since 2009, which is the main reason reported for the fall in banks' funding costs.

No — the JPMorgan report suggests banks are unlikely to use the funding-cost windfall to spark a price war by cutting lending rates aggressively.

The article describes 'out-of-cycle' cuts as rate reductions outside regular policy moves and says whether customers would receive larger out-of-cycle cuts depends on the price banks pay for deposits, which still fund most lending growth.

According to the article, the decision to pass on funding-cost falls will depend on the price of deposits — banks still fund most lending growth with deposits, so deposit pricing influences whether savings get passed to borrowers.

The article states the cost of new wholesale money — the price banks pay to borrow in financial markets — has fallen to its lowest level since 2009, though it doesn't go into technical detail beyond that point.

The article reports borrowers would only see a modest saving of about 0.1 percentage points if banks passed on the reduction in funding costs.

Investors should keep an eye on deposit pricing and any announcements about out-of-cycle rate cuts, as those factors influence whether banks pass funding-cost savings to customers — the report suggests a broad price war is unlikely.