National Australia Bank (NAB) and Westpac Banking Corporation have announced rate increases to their residential investor home loans and interest-only home loans, respectively.
NAB’s rate ratcheting will see an increase in the bank’s new and existing residential investor home loans of 0.15% per annum, taking NAB’s Variable Rate for Residential Investment Home Loans to 5.55%.
NAB will also increase the variable rate for NAB Homeplus Residential Investment Home Loans, available through NAB Broker, by 0.15% p.a., to 5.58% p.a., effective from Monday 12 December 2016.
Meanwhile, Westpac has stealthily upped its interest rates on new and existing interest-only home loans, according to sources of the Australian Financial Review
The bank is reportedly raising the standard variable rate by 8 basis points on interest-only home and investment loans, with the changes coming into effect 16 December.
For the bank's Equity Access loan's new and existing customers, rates will go up by 15 basis points, however the changes will not affect those Westpac home loan customers who make principal and interest repayments.
NAB’s rate hike is effective from Monday, 12 December 2016, and does not affect the Big Four bank’s Variable Rate for Home Loans (Standard Variable Rate) for owner occupier customers, which remains at 5.25% p.a, the bank has said.
NAB Chief Operating Officer, Antony Cahill has said that the rate increase is a result of an “increasingly challenging” fiscal environment, and that NAB takes a disciplined approach to managing its entire portfolio.
The adjustments have been made to ensure sustainable and responsible lending to all customers, he said.
“We don’t make these decisions lightly, and these changes reflect the increasingly challenging environment we are currently operating in as we seek to meet the needs of all our customers and our shareholders.”
“As was evident during the recent bank reporting season, net interest margins – the difference between what we pay to borrow funds to lend to our customers and what our customers pay – are down, particularly in home lending, and they remain under pressure.
“A low-rate environment poses considerable challenges to all lenders, and we must respond to what is happening in the economy and the market. In doing so, we have to consider a range of factors including the ongoing need to hold longer-term stable sources of funding, continued elevated funding costs, regulatory requirements, and the competitive pressures at play.
“We will continue to regularly review our products and pricing, and make decisions that enable us to achieve a balance for all stakeholders – borrowers wanting to buy a home or grow their business, depositors and investors seeking a return on their investment, and our shareholders who rely on our dividends,” he said.
Earlier this year, NAB made changes to the way it prices its home loans based on loan purpose and repayment type.
“We can now be more specific in how we manage our entire home lending portfolio in line with economic conditions and regulatory requirements,” said Cahill, adding that the investor segment continues to be important to NAB, and interest rates for all home buyers are around their lowest levels in more than 50 years.
“NAB is committed to providing customers with great value and service, and home loan products that suit their needs at a competitive price,” Cahill stated.
NAB’s and Westpac’s rate spikes come following rival Commonwealth Bank of Australia’s announcement it would increase rates on fixed term owner occupied and investment loans.
Three of the four major banks have now responded to the rising international funding costs, which many are saying is a result of the 'Trump effect', tougher underwriting standards and tighter rules.