the adviser logo

Bank announces 20bps rate rise

by Charbel Kadib10 minute read
Coins and arrow up

The second wave of out-of-cycle mortgage rate hikes has continued, with another lender announcing increases of up to 20 basis points.

NAB-owned lender UBank has announced that it has increased interest rates on its fixed rate investor home loan products by 20 basis points, effective for new loans issued as of 14 January. 

The lender’s investor mortgage rate increases are as follows:

  • A rise of 20bps on its 1-year UHomeLoan fixed rate with interest-only terms, from 3.99 per cent to 4.19 per cent
  • A rise of 20bps on its 3-year UHomeLoan fixed rate with interest-only terms, from 3.99 per cent to 4.19 per cent
  • A rise of 20bps on its 5-year UHomeLoan fixed rate with interest-only terms, from 4.49 per cent to 4.69 per cent

UBank is the latest lender to increase its home loan rates, after the Bank of Queensland (BOQ) and Virgin Money announced rate increase of up to 18bps and 20bps, respectively.


Both BOQ and Virgin Money attributed their decisions to lift home loan rates to the sustained rise in wholesale funding costs.

The out-of-cycle interest rate rises have prompted calls from some market analysts for a cut to the official cash rate form the Reserve Bank of Australia (RBA) amid weakening housing market conditions and a rise in mortgage stress.

Speaking to The Adviser’s sister publication, Mortgage Business, principal of Digital Finance Analytics (DFA) Martin North said that he expects mortgage stress to continue mounting in the short to medium term, particularly off the back of out-of-cycle interest rate hikes.

“My expectation will be that we would continue to see the same sorts of trends that we’ve seen in the past year or so,” Mr North said.

“Interest rates probably will rise, so we’ve had the Bank of Queensland lift rates a couple of days ago. And my expectation is that other banks will have to lift interest rates, because they’ve got margin pressure at the moment because funding costs are a lot higher.”

Mr North added that even small rate rises could push more households into mortgage stress and heighten risks of default for borrowers already in mortgage stress.

“A lot of households are very close to the wind at the moment, so even small changes in cash flow will have a significant impact,” he continued.

“[Even] an 18-20bps increase in mortgage rates is enough to tip a few more people over into stress. It will not have a massive impact, but it will certainly push more [borrowers into mortgage stress].

“The other point is that it will actually tip more borrowers into severe stress, that’s when you’ve got a serious monthly deficit. That’s the leading indicator for default 18 months down the track.”

[Related: Virgin Money hikes variable rates]

coins stack arrow up ta

Charbel Kadib


Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: [email protected]

Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more