Westpac, NAB play the Trump card and raise rates for property investors
December 5, 2016
WESTPAC and National Australia Bank have hit property investors with out-of-cycle rate rises, sandbagging their profit margins as the “Trump effect” compounds the impact of rising funding costs.
The lenders yesterday announced they were lifting rates on a suite of home loan products, following a trail blazed by the Commonwealth Bank late last week.
National Australia Bank has lifted rates variable investment home loans while Westpac is increasing rates on interest-only loans, which are used mostly by investors.
On Friday, the CBA hiked rates on fixed-term mortgage products.
NAB — which has about $99 billion of investment property loans on its books — revealed it would lift variable rates on existing and new investment loans by 0.15 percentage points to 5.55 per cent.
The increase comes into force next Monday. NAB’s variable rate for owner-occupiers remains at 5.25 per cent.
Westpac has raised interest-only rates by 0.08 percentage points, to 5.41 per cent for owner-occupiers and 5.68 per cent for investors.
No bank has yet ventured to lift rates out of cycle with the Reserve Bank on variable owner-occupiers loans — the most politically sensitive market.
NAB chief operating officer Antony Cahill did not rule out further increases, saying “we will continue to regularly review our products and pricing” as the bank tried to balance the needs of shareholders, savers and borrowers.
“As was evident during the recent bank reporting season, net interest margins — the difference between what we pay to borrow funds to lend to our customers and what our customers pay — are down … and they remain under pressure,” he said.
IG Markets strategist Evan Lucas said the hikes were a continuation of the “Trump effect”.
The amount banks pay in international markets to borrow funds that they lend out in Australia has climbed in recent months — a trend exacerbated by Donald Trump’s presidential election victory in the US.
Interest rates have been rising on speculation that, if Mr Trump delivers on his infrastructure spending promises, it will fuel inflation.