AMP Bank increases variable rates

The changes will be effective for new business from tomorrow, 13 July, and for existing business from Monday, 16 July.

The changes are as follows:

• 8 basis points for owner-occupied principal and interest loans
• 17 basis points for investment principal and interest loans
• 17 basis points for both owner-occupied and investment interest-only loans

The news follows on from similar changes made at the end of June, when AMP raised rates on its interest-only home loans for (new business) owner-occupiers by 40 basis points.

Interest rates on fixed rate loans, some of which dropped by up to 70 basis points last month, will not change.

Speaking of the changes, AMP Bank Group executive Sally Bruce said that the decision was made off the back of an increase in funding costs.

“We are managing our portfolio in a very active market and our decisions on rates are never taken lightly,” Ms Bruce said.

“We have held off passing this cost on to customers for as long as we can and in fact have not increased interest rates for existing customers since June last year.

“With any change, we are focused on balancing the interests of our customers, the regulator and our business.”

The move comes as a raft of lenders have hiked their rates in response to increased funding costs.

On Monday (9 July), Macquarie Bank announced that owner-occupier variable rate loans with principal and interest repayments will increase by 0.06 of a percentage point, while those with interest-only repayments will increase by 0.10 of a percentage point across all LVR bands.

Investment and SMSF loans with variable rates will increase by 0.10 of a percentage point.

Macquarie will drop its three-year fixed rate by 10 basis points for all owner-occupier and investor loans.

The changes are effective from 13 July for new customers and 23 July for existing customers.

ING also flagged the need to increase rates by 10 basis points this week for variable owner-occupied mortgages, while non-bank lender Pepper is also believed to have lifted rates by up to 55 basis points recently.

Speaking to The Adviser sister title Mortgage Business recently, the chief financial officer (CFO) of Auswide Bank, Bill Schafer, attributed the lender’s decision to lift interest rates on its mortgage products to the sharp rise in the bank bill swap rate (BBSW).

“Our funding costs have risen significantly in the last four months,” Mr Schafer said.

“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.”

The recently released Deloitte Australian Mortgage Report 2018 also noted that funding costs were increasing and suggested that it was the biggest challenge for non-majors.

“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.”

[Related: Lenders hike rates as funding costs spike]