Only two lenders made changes to their standard variable mortgage rates yesterday, following the Reserve Bank of Australia's announcement that it had cut the cash rate by 25 basis points, to 3.25 per cent. That left plenty of room for speculation about how much of the cash rate change lenders would pass on.The Bank of Queensland said it would cut its standard variable rate by 20 basis points, to 6.71 per cent, effective from October 19.Bankmecu said it would cut by 25 basis points, effective October 15.The Reserve Bank's commentary on banks' funding conditions in the latest Financial Stability Review, published last month, suggests that wholesale funding costs have come down over the course of the year but competitive pressure is keeping the cost of deposits high.The RBA said: "The ongoing difficulties in Europe have been contributing to volatile funding conditions for Australian banks but in recent quarters wholesale funding pressures have eased from the levels of late last year. The banks have been able to take advantage of periods of more favourable market conditions to issue opportunistically."The pricing of banks' senior unsecured bonds relative to benchmark rates remains higher than in recent years but significantly less than the peaks at the end of 2011. "Spreads relative to commonwealth government securities on five-year unsecured bank bonds have declined by around 80 basis points in recent months and are now at similar levels to mid-2011. "Continued demand for high quality assets and limited issuance has seen spreads on covered bonds narrow considerably since the start of the year. "The strong competition for deposits has widened their spreads relative to benchmark rates, contributing to an increase in banks' funding costs relative to the cash rate."Deposits now account for 53 per cent of banks' funding - up from 40 per cent in 2008.The RBA said: "The major banks are generally aiming to fund new lending with new deposits on a dollar for dollar basis. Changes in their stock of lending and deposits show that has been happening for some time. "This approach is likely to support a continued upward trend in the proportion of funding sourced from deposits, at least in the near term."Stronger competition for deposits would mean banks would face the prospect of their margins coming under pressure from further increases in funding costs, though the risk to their profits would be mitigated to the extent banks can reprice their books."