NAB keeps rates on hold ‘to rebuild trust’

NAB has heeded PM Scott Morrison’s warnings of an “angry” Aussie public, announcing it will not follow the rest of the Big Four in jacking up rates.

NAB has heeded Prime Minister Scott Morrison’s warnings of an “angry” Aussie public, announcing it will not follow the rest of the Big Four in jacking up rates to “rebuild trust” with customers.

The bank was widely expected to hike interest rates after Westpac, ANZ and CommBank all slugged borrowers with hundreds of dollars a year in extra interest payments, blaming “higher wholesale funding costs”.

The surprise move means NAB’s standard variable home loan rate will remain at 5.24 per cent, for now. “We are listening and acting differently,” NAB chief executive Andrew Thorburn said in a statement on Monday.

“We need to rebuild the trust of our customers, and by holding our NAB Standard Variable Rate longer, we help our customers for longer. By focusing more on our customers, we build trust and advocacy, and this creates a more sustainable business.”

Mr Thorburn did not rule out rate hikes in the future, saying NAB would continue to regularly review its rates and assess market conditions, including funding costs.

It comes after CommBank and ANZ both announced rate hikes within minutes of each other on Thursday, following Westpac’s move a week earlier to fire the starting gun on out-of-cycle rate hikes.

CommBank will raise rates by 15 basis points from October 4, ANZ will raise rates by 16 basis points from September 27 and Westpac will raise rates by 14 basis points from September 19, bringing them to 5.37 per cent, 5.36 per cent and 5.38 per cent respectively.

NAB said the decision benefited more than 930,000 customers. Had it decided to increase its rate by 15 basis points, the average customer with a $300,000 loan would have paid an extra $28 a month, or $336 a year.

NAB, which has the smallest loan book of the Big Four, stood to gain an additional $346.5 million a year in interest payments had it raised rates. CommBank, ANZ and Westpac will collectively rake in an extra $1.4 billion over the next 12 months, according to comparison website Mozo.

Mr Morrison on Friday said the big banks didn’t realise how angry Australians were with them. “I think people would be disappointed with the banks in their response today and it seems that the banks still have a bit to learn about how angry the Australian public are,” he told reporters in Melbourne.

Canstar finance expert Steve Mickenbecker said unhappy customers could escape the clutches of the big banks for smaller lenders offering better rates — but warned it may be a little less convenient that they were used to.

“You’re not going to find a branch to make your application, you might have to be prepared to do a lot more self-service, sit down and put together an application that’s partially online, you’ll have to send documents back,” he said.

“All of those things are extra hassle. Sometimes going for a smaller player you will have to accept it won’t be quite as smooth as going to the Big Four, but if the saving over 30 years is half a per cent, that can be worth the hassle in the first couple months.”

The rate hikes came days after the Reserve Bank again left the official cash rate on hold at its record low of 1.5 per cent, extending the country’s longest ever period without an official rate move to more than two years.

Despite the low-rate environment in Australia, the cost of borrowing in overseas money markets has increased following successive US Federal Reserve rate rises.

“While there has been a lot of adjustments to mortgage rates over recent years, the big difference with the latest announcement is that the higher mortgage rates are going to affect owner-occupiers,” CoreLogic research analyst Cameron Kusher said in a note on Friday.

“Most of the previous mortgage rate changes announced by the major banks have only affected investors and those with interest only mortgages.”

He said while many of the smaller regional banks had gradually been raising rates over recent months, the Big Four had resisted until now but “it seems they too have had their hand forced by higher funding costs”.

Mr Kusher said the timing of the rate hikes was “interesting” coming at the beginning of the traditional spring selling season, which most lenders normally use to offer enticing mortgage rates to “jostle for market share”.

The housing downturn in the two major capitals is already “well embedded”, with Sydney down 5.6 per cent from its peak and Melbourne down 3.5 per cent, due to tighter credit conditions and higher mortgage rates for investors and interest-only borrowers.

“This has occurred so far without higher interest rates for owner occupiers paying off principal and interest however, that is about to change,” Mr Kusher said.

The rate hikes are expected to heap political pressure on the major banks, which this week return to Melbourne for the sixth round of public hearings in front of the Banking Royal Commission.

CommBank last month posted an annual profit of $9.233 billion. The 4.8 per cent decline marked the first annual drop in profit since 2009 for the nation’s biggest lender. It was largely due to a $700 million penalty paid to the money laundering watchdog.

In May, ANZ, Westpac and NAB reported half-yearly profits of $3.32 billion, $4.2 billion and $3.3 billion, respectively. ANZ reports its full-year financial results on October 31, followed by NAB on November 1 and Westpac on November 5.

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Originally published as NAB keeps rates on hold ‘to rebuild trust’