Non-major bank ME has announced it is increasing its variable home loan interest rates, citing increasing regulatory obligations as one of the reasons why.
Effective today (April 19) the standard variable rate for existing owner-occupier principal-and-interest borrowers with an LVR of 80% or less, will increase by 6 basis points to 5.09% p.a. (comparison rate 5.11% p.a.^).
Variable rates for existing investor principal-and-interest borrowers will increase by 11 basis points, while rates for existing interest-only borrowers will increase by 16 basis points.
ME CEO Jamie McPhee said the changes are in response to increasing funding costs and increased compliance costs.
He said: “Funding costs have been steadily increasing over the last few months primarily due to rising US interest rates that have flowed through to higher short-term interest rates in Australia. In addition, ME continues to transition its funding mix to ensure the requirements of the Net Stable Funding Ratio will be met and this is also increasing our funding costs.
“At the same time, industry reforms and increasing regulatory obligations are increasing our compliance costs.
“Despite these increases ME’s standard variable home loan for owner-occupier principal-and-interest borrowers with LVR 80% or less, is still lower than the major banks as it has been since ME became a bank in 2001. In addition, ME also continues to offer some of the highest deposit rates in the market.
“This was not an easy decision, but rising costs have forced us to reset prices to maintain a balance between borrowers, depositors and our industry super fund shareholders and their members, all while ensuring we continue to grow and provide a genuine long-term banking alternative.
“We will continue to assess market conditions and make changes to prices to maintain this balance if necessary.”
Earlier this month the non-major reported an increased demand from brokers, which was helping drive strong profit growth.
According to McPhee, total assets had grown 5% on the previous corresponding period to $27.5billion.