Steve Weston, general manager of residential and commercial lending at Challenger, told the Mortgage Finance Association of Australia in Sydney a week ago it appeared many home loans - including the popular professional packs that attract a discount of 70 basis points off standard variable rates of around 9.47 per cent - not only had no profit margin left over for lenders, but were making a loss on funding costs alone.Using representative data on funding (including the cash rate, the cash to bills spread, the funder's margin and current investor spreads), Weston estimated the cost of funding to lenders at around 8.8 per cent, which is more than the typical interest rate on a pro pack home loan at present.On the basis of Weston's data, the typical home loan rate probably needs to be closer to ten per cent than nine per cent.Some smaller lenders though are maintaining borrowing rates below that of Weston's cost of funding estimate, due to the alternate funding source of retail deposits.Victorian based credit union mecu offer three residential lending products at 8.44 per cent, with rates kept low as the deposit base exceeds the loan book, according to Rowan Dowland, general manager development.The total deposit book is around $1.27 billion, exceeding the loan book of around one billion dollars."The strongest growth area at the moment is first home buyers, who qualify for the 8.44 per cent regardless of lending amount," said Dowland.John Tancevski, chief executive officer of growing Community First Credit Union, said retail deposits account for 95 per cent of their $600 million lending portfolio, which allows the True Professional mortgage to be offered at 8.55 per cent, when $250,000 upwards is borrowed.Kevin Sherman, managing director at MyRate, said maintaining the Advantage Rate and Variable Rate lending products at 8.63 per cent, "was very tough"."Our funder is working with us to keep us competitive, and we are not looking at changing margins, so if the funder passes on a rate increase - we then have to review."Newcastle Permanent, Bananacoast Community and NSW Teachers all offer a variable rate mortgage product below 8.8 per cent, according to InfoChoice data.Products lifting rates last week included the Virgin Standard Home Loan Variable up 15 points to 8.99 per cent, with Australian Central increasing the Home & Investment Line of Credit and Standard Variable 14 points to 8.96 per cent, and IMB increasing a suite of mortgage products by ten points.