NAB warns of more rate hikes

NAB has warned it could further lift home-loan rates independently of the RBA after modestly exceeding the 25bp hike in official rates

NATIONAL Australia Bank has warned it could further lift home-loan rates independently of the Reserve Bank after avoiding a political backlash by modestly exceeding the RBA's 25-basis-point increase in official rates.

In the first response by one of the nation's top five banks to Tuesday's RBA increase, NAB yesterday announced a 29-basis-point hike in its variable home loan rate to 9.27 per cent -- the third time this year it has acted independently of central bank monetary policy.

But NAB seems likely to be topped by St George, after chief executive Paul Fegan told stockbroking analysts that the Green Dragon needed to add 15 basis points to the RBA increase to cover its escalating costs.

"Our propensity to act and how we think about these things was demonstrated in January,'' Mr Fegan said.

"We didn't go 18, 12, 15 (basis points) or we'd (have had to increase) twice ... we went 20.''

A St George spokesperson said last night, after Mr Fegan's comments, that the bank still had its rates under review.

She said there were "many more factors'' that determined rate policy besides funding costs, including the political environment.

Prime Minister Kevin Rudd urged banks earlier this week to show restraint on rates at a time when they were earning record profits.

Announcing NAB's increase, chief executive Ahmed Fahour said there had to be a balance between the interests of customers and shareholders, with many customers also shareholders through their superannuation funds.

"NAB is continuing to absorb a significant portion of the increased wholesale funding costs,'' Mr Fahour said.

"We are continuing to watch the market closely and will adjust our rates further if the increased ... costs do not subside.''

The bank's four-basis-point increase above the RBA adjustment appeared to be sufficiently restrained to avoid a Canberra backlash, with Wayne Swan confining his reaction to the banking industry as a whole.

The Treasurer said the nation's 12th consecutive rate rise had put families under significant financial pressure, which was why the Government had put together a package of measures to help customers switch banks.

"We believe the community will reward those banks that best shield families from the increased costs of borrowing flowing from the US sub-prime crisis,'' Mr Swan said.

"Similarly, banks who don't act in a way which their customers think is reasonable will now run a greater risk of losing customers.''