Last week, NATIONAL Australia Bank (NAB) and Westpac copied its rivals and raised their standard variable interest rates (SVR) by up to 43 basis points.
Westpac was the last of the four major banks to raise its rates, lifting them by 35 basis points to 7.86 per cent.
The increase adds about $56 to the average $250,000 home loan.
Retail and business banking boss Rob Coombe attributed the move to the bank’s rising average cost of funding which squeezed its net interest margin by 19 basis points in 2009/10.
“In this context, our interest rate decision has not been taken lightly,” he said in a statement.
“We have carefully balanced the varied interests of all our stakeholders, depositors, home loan customers, shareholders and staff, recognising our obligation to those stakeholders to run a sustainable bank.”
Westpac’s SVR was its reference rate, he said, adding the bank could help customers review all their options including discount offers and splitting mortgages between fixed and variable rates.
Interest rates on deposits would increase by at least a quarter of a per cent, the bank said in a statement.
Westpac said the rate increase will apply from Tuesday.
Earlier today, the National Australia Bank lifted its SVR by 43 basis points to 7.67 per cent.
Interest rates on NAB business loans will also rise by 43 basis points, the bank said in a statement.
NAB said interest rates on deposits will rise by between 25 and 100 basis points.
The rate rises will take effect from Monday, but NAB said it had yet to announce changes to interest rates from its Homeside unit.
NAB has also followed in ANZ’s footsteps to abolish its $900 early exit fees on new and existing NAB home loans, which would apply from December 6.
ANZ on Wednesday said it would scrap its $700 exit fee and lifted its standard variable rate (SVR) on home loans by 39 basis points to 7.8 per cent.
Westpac did not say if it would scrap its $700 exit fee, but said it would discount its three-year fixed home loan rate by 40 basis points to 7.09 per cent.
Commonwealth Bank (CBA) has not made any announcements regarding its $700 exit fees.
The bank attracted community outrage when it last week raised its SVR by nearly double the Reserve Bank of Australia’s increase to the official cash rate of 25 basis points.
CBA’s SVR is currently at 7.81 per cent.
NAB attributed its increase to the rising average cost of funds, driven by both higher wholesale funding costs and the cost of deposits.
The average cost “is expected to continue to rise for the foreseeable future,” the bank said.
It claimed it had been absorbing these extra costs to date, saying “it is not sustainable for us to keep doing that forever”.
“NAB will continue to absorb a significant portion of its increased average funding costs,” the bank said.
Nineteen lenders have raised their SVR since the Reserve Bank’s increase on November