National Australia Bank hikes mortgage rates

NAB has hiked mortgage rates for both owner-occupiers and investors, blaming regulation and higher funding costs.

NAB CEO Andrew Thorburn. Pic: Adam Yip

National Australia Bank has hiked mortgage rates across its lending book, out of cycle to any official move, blaming “increasing regulation and elevated funding costs”.

The bank’s variable rate for owner-occupier customers will rise from 5.25 per cent to 5.32 per cent. Investor loans will increase from 5.55 per cent to 5.80 per cent.

The changes — including a new fixed rate for first home buyers at 3.69 per cent — mark the first out-of-cycle rate hike by the big banks for both owner-occupiers and investors since late 2015, when Westpac led the industry in repricing home loan books.

They come a week after the chief executives of the big four banks appeared before the House of Representatives economics committee for the second time, as part of regular hearings called by the government after several scandals and for failing to pass on the RBA’s full August rate cut.

The changes for investors and owner occupiers come into effect on March 24, while the first homebuyer deal kicks in on March 16.

“The decisions we make on interest rates are difficult ones, and we want to assure our customers we do not take them lightly as we seek to achieve the right balance for all our stakeholders while considering the dynamic financial and economic environment in which we operate,” said NAB chief operating officer Antony Cahill.

“The difference between what we charge and how much it costs us to fund a mortgage remains under pressure, with intense competition, increasing regulation, and elevated funding costs.”

NAB also led the industry in hiking investor loans in December — but left owner-occupier rates steady — in a move that marked the biggest rate repricing by the big banks since holding back half the August cash rate cut.

NAB claimed today’s 7 basis point hike in rates for owner occupiers would cost borrowers an extra $13 a month on a $300,000 principal and interest home loan for 30-years.

Amid concerns about rising stress in parts of the country, NAB - whose CEO Andrew Thorburn also chairs The Australian Bankers Association - said customers should speak to their banker or broker “about what home loan suits them best”.

The bank blamed its hike in investment lending rates on the Australian Prudential Regulation Authority’s 10 per cent annual growth cap, after experiencing “strong growth in the investor segment”.

“We’re committed to managing our investor lending growth in line with the regulator’s guidance,” Mr Cahill said

Rival Commonwealth Bank has recently also taken several steps to slow investment lending growth, this week lowering its loan to value ratio so buyers need a larger deposit, and hiking rates at subsidiary Bankwest.

According to Deutsche Bank analysis, CBA is growing investor loans around 8 per cent a year while NAB is about 5 per cent. Bendigo and Adelaide Bank is exceeding APRA’s growth cap at 12 per cent.

NAB has around $100 billion of investment loans on its books. The bank also has $135bn of mortgages to owner-occupiers.