Date
April 7, 2016 - 10:13AM Clancy Yeates and Shaun Drummond
Bank of Queensland is lifting interest rates for owner-occupied mortgage customers by 0.25 of a percentage point, while property investors will wear a rate hike of about half this size.
In a surprise move blamed on higher funding cost, the regional lender on Thursday announced the first significant rate hike for mortgage customers since most banks raised interest rates in late 2015. It's a change that is likely to be watched closely by rivals.
BOQ also raised its interest rates by 0.18 of a percentage point independently of the Reserve Bank in November last year, a time when most banks were hiking rates.
Chief Executive of Bank of Queensland Jon Sutton says higher funding costs and competition are to blame for the rate hike. Photo: Steven Siewert Chief executive Jon Sutton made the announcement on Thursday as the bank announced a 7 per cent lift in first-half cash profit to $179 million, helped by faster loan growth and low bad debts.
Mr Sutton said the bank's move was the result of it balancing "growth, risk and margins over the long term."
"This is not a decision that was made lightly and we were very mindful of the impact on our customers even in an environment where interest rates remain at very low levels," he said.
"However, given the fiercely competitive market and increased funding spreads and hedging costs, these increases are necessary to help us achieve the appropriate balance between growth, asset quality and profitability," he said. Wholesale funding costs
BoQ's rate hike will see its standard variable rate for owner-occupiers rise to 5.86 per cent, while its standard variable rate for property investors will rise by 0.12 of a percentage point, to 6.28 per cent.
Its lower-cost home Clear Path loans will have an in interest rate of 4.72 per cent for owner-occupiers and 5.14 per cent for investors.
The interest rate rise comes after banks' costs from wholesale funding have been rising this year as a result of global volatility.
Commonwealth Bank, Westpac, National Australia Bank and ANZ Bank have all increased interest rates for their business borrowers in the opening months of 2016, which they justified by pointing to higher funding costs and tighter regulation.
However, Reserve Bank governor Glenn Stevens said in February that the recent rise in wholesale funding costs had not been sufficient to warrant banks increasing their lending rates independently of the central bank.
Mr Stevens said banks were still able to roll over debt at lower interest rates than they had paid several years ago.
"I do not see much of a case for independent increases in lending rates based on funding costs as they have evolved just lately," Mr Stevens said in February.
