BoQ increases home loan rates for second time in eight months

A leading bank has hiked its interest rates for second time in eight months, blaming higher costs of funding for the rise. Experts expect other lenders could mirror the move.

BOQ is raising interest rates, again. Picture: Peter Wallis

BOQ is lifting interest rates for variable loans for the second time in eight months, again blaming higher costs of funding for the move.

It marks the first bank to crank up variable rates in the new year. Experts expect other lenders could mirror the move.

But the hiking of interest rates also puts additional pressure on Bank of Queensland’s lending book, which analysts say is growing slower than rivals in an already lukewarm market.

The 176-branch BoQ is lifting rates on a range of products between 11 basis points and 18 basis points. It comes after the bank in June last year announced rates increases of between 9 basis points and 15 basis points.

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As before, BoQ on Tuesday blamed its own expense base. “Continuing funding cost pressures and intense competition for term deposits have contributed to this decision,” BoQ said. “Offsetting the impact of these costs ensures we balance the needs of our borrowers, depositors and shareholders.”

BOQ said those pressures included rates on some term-deposit products last year lifting 40 basis points.

Bell Potter stockmarket analyst TS Lim told The Courier-Mail the move was not surprising “given funding costs have edged higher since December”.

“They would want to protect margins … rather than go for loan growth, I suspect,” he said.

Comparison website RateCity said BoQ was the first bank to officially increase rates this year, while finder.com.au said 13 lenders had lifted variable interest rates in the past three months.

“It remains to be seen whether (BoQ’s move) is a one-off event or whether this triggers other lenders to follow suit. In our experience, the latter is more likely,” Finder’s Graham Cooke said.

The website calculated an 11 basis point rise to 3.99 per cent on BoQ’s heavily promoted “Economy Owner” package, for people paying off both interest and principal on an average 30-year loan, would mean an additional $292.80 in repayments per year.

The whole bank sector is slowing at the moment — with BoQ one of the most sluggish. Morgan Stanley analysts recently estimated that industrywide loan growth was at about 5 per cent in the year to November, down on 7 per cent from a year earlier.

Compared to big four lenders and Bendigo Bank, BoQ’s growth was slowest at 1.3 per cent. BoQ was also among lenders whose growth was falling below analyst forecasts.

The latest loan rise kicks in from January 11.

The untouched exception is its “Clear Path Owner” for homeowners paying off the principal and interest rates, which makes up a chunk of its variable home-loan book.

BoQ shares closed up 16c at $9.97.