ME bank is the latest Australian bank to hike home loan rates after Suncorp Bank, State Custodians and loans.com.au raised the majority of their variable rates over the past month.
ME Bank was the second bank to officially cite cost of funding pressures as one of the drivers for the hike.
ME’s has hiked the standard variable rate for both owner occupiers and investors with a catch: it only applies to existing customers, effective from yesterday.
RateCity money editor Sally Tindall said that existing customers had a right to feel short changed at this decision.
“There’s no question banks are feeling cost of funding pressures, but unlike its competitors, the bank is only asking their existing variable rate customers to fund the shortfall, not the new ones.
“What they’re effectively saying is that they value new customers ahead of old one.
“If that doesn’t sit well with you, don’t take this news lying down” she said. “Find out what they are offering new customers and ask ME to match this rate.
ME home loan rate hikes
ME is lifting their variable rates for existing owner-occupier paying principal-and-interest by 6 basis points. This means their standard variable rate for people with an LVR of 80 per cent or less will go from 5.03 per cent to 5.09 per cent.
In addition to this, the bank has said investors paying principal-and-interest will see their rates increase by 11 basis points, while customers paying interest-only will see their rates increase by 16 basis points.
Cost of funding will lead to more hikes
All eyes are on the three-month Bank Bill Swap Rate (BBSW) – a key cost of funding for Australian banks which has continued to escalate in recent weeks.
Sally Tindall, money editor at RateCity, said, “The question now is how long until the rest of the home loan market follows suit.”
“Global funding pressures are squeezing bank profits, with no clear end in sight. While only a handful of banks have made the decision to pass some of these costs onto customers, we think it’s only a matter of time until other banks do the same,” she said.
Tindall believes one thing holding the big banks back is the continued fallout from the Royal Commission. “Just this week we’ve seen Australia’s biggest bank charge fees to dead customers, Westpac advisors offering bad advice to boost their bonus repayments and the resignation of AMP’s chief executive after it was revealed ASIC for almost a decade to cover its practice of charging customers fees for advice that was never delivered,” she said.
