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More lenders succumb to funding pressures

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Reporter 5 minute read

Two lenders have joined the list of non-majors to announce out-of-cycle rate hikes on their home loan products, pointing to a rise in funding costs.

Bluebay Home Loans and HomeStart Finance are the latest players to lift interest rates on their mortgage offerings, with both mortgage providers attributing their decisions to the rise in wholesale funding costs.

Bluebay Home Loans (funded by Adelaide Bank) has announced that, as of this Thursday (26 July), it will lift variable interest rates for new business on its Bluebay Balanced Home Loan product by 12 basis points.

In a statement to The Adviser, a Bluebay spokesperson said: “A number of institutions have increased their variable rates as a result of the increasing funding costs within the market.


“We, unfortunately, are not immune to these pressures and our funder has delayed this increase as long as possible.”

Bluebay is funded by Adelaide Bank, which also recently announced variable rate increases on its owner-occupied, investment and interest-only home loans by up to 16 basis points.

Following the announcement, Bendigo and Adelaide Bank’s managing director, Marnie Baker, said: “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.

“Funding costs have been steadily increasing this year, and we’ve absorbed this cost impact to date. [The] adjustment to the variable interest rates will assist in balancing this funding cost increase.”

HomeStart changes rates


Meanwhile, HomeStart has increased its 1-year fixed rates on its HomeStart and Graduate Loan and its Low-Deposit Home Loan by 20 basis points, to 5.19 per cent and 6.19 per cent, respectively, “due to an increase in the cost of funding”.

Several lenders have lifted their rates in the past few weeks — including Macquarie Bank, AMP, ING, Bank of Queensland, Heritage Bank, Auswide Bank and Homeloan — with most attributing their decision to an increase in the bank bill swap rate (BBSW).

Speaking to The Adviser, chief economist AMP Capital Shane Oliver noted that he expects the big four to announce similar changes.

“I suspect that it’s highly likely the major banks will follow suit as well,” Mr Oliver said.

“The major banks have a bit of flexibility because they get more of their funding from depositors than the smaller banks would, and certainly a lot more than the non-bank lenders do.”

However, Mr Oliver also observed that recent rises from non-majors are slight in comparison to an official cash rate hike from the Reserve Bank, and said that he expects such rate changes to influence the central bank’s decision to keep the cash rate on hold.

“What we’re seeing at the moment is modest in the grand scheme of things compared to what the Reserve Bank might do,” Mr Oliver said.

“I think it’s also likely that the Reserve Bank will keep interest rates on hold because the banks are increasing their rates for them.”

[Related: Non-majors lift rates, majors expected to follow suit]

More lenders succumb to funding pressures
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