Bank ‘forced’ to hike interest rates

The non-major has lifted its standard variable rate on owner-occupier principal and interest mortgages with a loan-to-value ratio (LVR) of 80 per cent or less by 6 basis points, from 5.03 per cent to 5.09 per cent.

ME has also increased interest rates for basic owner-occupier interest-only loans by 16 basis points, from 4.84 per cent to 5.00 per cent.

Further, rates on basic investor principal and interest loans have risen by 11 basis points, from 4.69 per cent to 4.80 per cent.

Interest rates on basic investor interest-only loans have also been lifted, increasing by 16 basis points, from 5.09 per cent to 5.25 per cent.

ME CEO James McPhee claimed that the bank was “forced” to increase rates in response to rising funding and compliance costs.

“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.

“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.”

[Related: Lending slows by 18% at regional bank]