Suncorp hikes home loan and small business interest rates

The out-of-cycle home loan and small business rate rises bring Suncorp into line with its peers.

The big four banks have so far resisted raising owner occupier rates out of cycle to the Reserve Bank, which last occured in late 2015.

Suncorp has hiked home loan and small business interest rates just days into the New Year, broadening the industry’s recent repricing to offset rising funding costs and capital requirements.

The mid-tier lender, which has $40.6 billion of mortgages, on Wednesday upped its standard variable interest rate for new and existing owner-occupier borrowers by 15 basis points to 5.55 per cent, effective January 23.

It came as Digital Finance Analytics warned around 20 per cent of households with an owner occupied mortgage would have difficulty if interest rates rose even by less than 50 basis points this year.

Suncorp last month also hiked investor borrowing rates 15 basis points to 5.87 per cent, quickly following increases by the big four lenders.

However, mid-tier rivals Bank of Queensland, ING Direct and Bendigo and Adelaide Bank waited longer to reveal their strategies and raised borrowing rates for both investors and owner occupiers, thus repricing their entire home loan books and generating greater income.
Suncorp’s adjustments on Wednesday — which include reversing recent rate reductions on its “55 plus” transaction accounts — brings the bank into line with immediate rivals. However, the Brisbane-based banking and insurance company also raised small business lending rates 15 basis points to 5.14 per cent. Rates for larger commercial business and farming customers remain unchanged.

“Increasing competition for quality funding sources, the cost of meeting regulatory change and events overseas that have altered the outlook for interest rates globally, have led to rising funding costs,” said new Suncorp banking and wealth chief David Carter.

Analysts said the moves reflected that smaller lenders were facing even greater pressure on their profits than the big four banks due to their higher reliance on deposits for funding and thus greater crunch from the record low official cash rate.
Smaller players also faced heightened competition from the majors last year amid heavy discounting off advertised mortgage rates.

As global regulators squabble over new rules, Mr Carter pointed to pressure on returns from rising capital requirements including the domestic “unquestionably strong” requirement that the banking regulator will publish this year for all lenders.

“While we have been absorbing these increasing costs, it’s evident that the trend is not likely to change,” he said.

The big four banks have so far resisted raising owner occupier rates out of cycle to the Reserve Bank, which last occured in late 2015. Instead, Commonwealth Bank last month lifted variable investment home loan rates by seven basis points to 5.56 per cent, further expanding the difference between the 5.22 per cent paid by owner-occupiers.

National Australia Bank lifted investor rates 15 basis points to 5.55 per cent, while ANZ followed raised them eight basis points to 5.6 per cent. Westpac also raised interest-only rates for investors by eight basis points to 5.68 per cent, and to 5.41 per cent for owner-occupiers.