THE global credit crisis is shackling Australian banks from cutting home loan interest rates, ANZ chief executive Michael Smith is warning.

Mr Smith says he sees no sign of the industry being able to reduce the additional 40 basis points added to mortgage costs since January. This is because the price of funds in the money markets is higher than the official rate set by central banks.

The average standard variable mortgage offered by the banks is about 9.5%. This is after the industry passed on the extra price of its own financing costs in increases over and above the successive quarter-point hikes instituted by the Reserve Bank since last spring.

But while spikes in short-term money markets and longer-term debt sources have eased since the peak in March, the gap has not yet narrowed enough for the banks to bring their loans to customers closer into line with the RBA's lower official rate.

In recent weeks, the big banks have raised funds from a variety of money markets to meet lending demands placed on them at rates of between 80 basis points and 140 basis points over the current "swap" rates.

Mr Smith told the Australia Lebanon Chamber of Commerce in Sydney on Friday the gap in rates was still much wider than the recent average.

"While my nine months back in Australia has reminded me there is a lot of politics around banks, there is unfortunately no sign at present we will be able to reverse the increases we have had to pass on to borrowers over and above official rate increases any time soon," he said. "Some (people) were quick to call an easing in the credit crisis after the bail-out of US investment bank Bear Stearns in March … My own feeling is it will take longer for this to work through."