Bendigo Bank has announced that it will increase its variable interest rates on mortgages from 23 July, becoming the latest lender to do so as a result of “funding cost increases”.
The non-major bank has announced that, from Monday, 23 July, it will increase variable interest rates across home loans and lines of credit for owner-occupiers and investors.
The largest rate increase will be faced by owner-occupiers with interest-only loans, who will see rates rise by 16 basis points.
Owner-occupier principal and interest loans will increase by 10 basis points as will lines of credit and investment loans.
The bank, which is reportedly the third most trusted brand in Australia, said that the changes would mean that customers with a $250,000 home loan that are repaying on a principal and interest basis would see their repayments increase by $15.71 a month over a 30-year term.
Speaking of the changes, Bendigo Bank’s new managing director, Marnie Baker, said that the changes reflect the increased cost of funding.
“When setting interest rates, our bank needs to consider many factors and carefully take into account the needs of our stakeholders including customers, shareholders, staff, partners and the broader community,” Ms Baker said.
“Funding costs have been steadily increasing this year, and we’ve absorbed this cost impact to date.
“Today’s adjustment to the variable interest rates will assist in balancing this funding cost increase.”
The new CEO, who commenced her role on 2 July, added that the bank “carefully balance[s] the interests of our mortgage customers, those who earn money through deposits and those who invest in [the] bank”.
She continued: “We must ensure our pricing remains market-competitive, provides the appropriate platform for sustainable growth and supports the hundreds of communities in which we operate.”
Several lenders have lifted their rates in the past week. AMP Bank has increased its variable lending rates for all owner-occupiers and investors for both new and existing business, while Macquarie Bank and ING have also recently changed their interest rates.
Indeed, a raft of non-major banks have been hiking rates, which the chief financial officer (CFO) of Auswide Bank, Bill Schafer, attributed to the sharp rise in the bank bill swap rate (BBSW).
“Our funding costs have risen significantly in the last four months,” Mr Schafer told The Adviser’s sister title, Mortgage Business.
“The BBSW — the 30-day rate and the 90-day rate — has had a large effect on our wholesale funding lines, and they’ve increased by between 30 and 35 points since the beginning of March, so that’s had a substantial effect on our net interest margin.
“We’ve been trying to absorb that across that period of time, with the hope that those costs would be relieved and the BBSW rates would decline, but now we’re nearing the end of the fourth month, we’ve taken the decision that the impact on our net interest margin is too severe, and unfortunately we needed to do an out-of-cycle rate increase.”
Further, the recent Deloitte Australian Mortgage Report 2018 found that the biggest challenge for non-majors is access to funding relative to the big four.
“We have seen that in the most recent fortnight, some of the non-majors have had to move their standard variable rate in response to movements in the underlying BBSW spread over cash,” Deloitte financial services partner James Hickey said.
“The majors have so far been able to absorb that and not pass on that movement. They may well move on it soon, but it just goes to show the heightened level of sensitivity the regional lenders have to wholesale funding markets.”
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