Home loan rates steady for now
THE nation’s lenders continue to adjust interest rates on higher risk products in response to the global credit crunch, but mainstream banks have so far avoided any hike in their variable home loan rates.
This is despite warnings from three of the Big Four bank chief executives that profit margins are under pressure due to increased funding costs.
Rate City chairman Andrew Willink said yesterday that banks would “think twice” before lifting their standard variable rates outside any Reserve Bank tightening of the official cash rate.
“The banks will suffer a margin squeeze, but I believe they will fund that internally and will not change their variable rates,” he said.
The situation was different with riskier products like credit cards, personal loans and margin lending.
The majors had already made adjustments on these products, often citing the need to catch up with previous RBA rises that had not been passed on to customers for competitive reasons.
Mr Willink said a further test would emerge towards the end of this month, when a lot of securitised mortgage paper was due to be rolled over.
He predicted that mortgage originators would feel “a lot of pressure” to lift rates.
In a further sign of the big banks moving on riskier products, ANZ lifted its variable margin loan rate earlier this week by 0.05 per cent.
A bank spokesman said while there was continuing pressure on margins due to the turmoil in global financial markets, the bank had no current plans to pass on its higher costs to mainstream consumer lending products.
“But clearly if the current environment continues for the longer term, that will be considered,” he said.
ANZ, Commonwealth Bank and National Australia Bank have all warned that mortgage rates could be lifted if higher funding costs persist.
Westpac chief executive David Morgan was the outrider, saying in a market update on Monday that it was too early to determine the extent to which the turmoil was cyclical or structural, meaning permanent.
Dr Morgan stressed there was no current intention to lift mortgage rates.
Non-bank lenders such as Bluestone and Liberty Financial, which do not have the benefit of a large cushion of deposits, have already hiked home loan rates by more than the 25 basis point increase in cash rates announced by the RBA last month.
Adelaide Bank has followed suit, with a 30 basis point rise in its variable low-doc rate.
The Big Four, though, will be under sustained political pressure in the imminent federal election campaign to keep a lid on rate increases.
