AMP Bank joins other lenders in hiking home loan rates

AMP is the latest lender to lift mortgage rates, noting it can no longer wear the impact of soaring funding costs.

AMP chief executive Mike Wilkins. Picture: Britta Campion/The Australian

AMP has become the latest lender to hike interest rates for home loan customers, as the bank admits it can no longer wear the impact of soaring funding costs that have spiked and show no signs of easing.

AMP Bank today announced it is lifting variable rates for both owner occupier and investor home loans, with the changes effective July 13 for new customers and July 16 for existing customers.

Owner occupiers paying off principal and interest will see their rates increase by 8 basis points, while those paying interest-only mortgages will face a 17bps lift.

For investors, both principal-and-interest and interest-only loans will be hiked by 17bps.

AMP Bank group executive Sally Bruce echoed other lenders that have recently embarked on out-of-cycle rate hikes, saying the changes were driven by higher funding costs.

“We are managing our portfolio in a very active market and our decisions on rates are never taken lightly.

“We have held off passing this cost on to customers for as long as we can and in fact have not increased interest rates for existing customers since June last year.

“With any change, we are focused on balancing the interests of our customers, the regulator and our business,” Ms Bruce said.

Macquarie, Bank of Queensland, IMB, Suncorp Pepper Group and ME Bank have all increased home loan rates in recent weeks due to soaring short-term bank funding costs which are squeezing net interest margins. The big four banks are widely tipped to follow suit and raise rates by September, though political sensitivities stemming from the banking royal commission may see them hold fire.

The punishing increase in the spread between the three-month bank bill swap rate and the overnight index swap has been in play since early this year and Citibank last month predicted the higher funding costs may be more permanent than initially anticipated.

The higher rates come as households are already struggling to cope with record levels of debt. There are growing concerns that the out-of-cycle rate hikes will put crippling financial stress on already maxed-out household budgets.