BankSA hikes home loan interest rates after Westpac and Commonwealth Bank

ANZ and the National Australia Bank announced on Friday that they will follow Westpac and Commonwealth Bank and increase their standard variable interest rates next month.

Westpac was the first bank to make a move, shifting rates up by 20 basis points last Tuesday.

The Australian Prudential Regulation Authority (APRA), the official banking regulator has criticised the banks for a lack of common sense lending, and has already taken measures to force the big four to slash their lending to property investors.

Shadow Assistant Treasurer Andrew Leigh told Sky News on Thursday he was surprised by CBA’s move to rise the rates.

The banks have blamed the need to hike rates on the banking regulator’s recent decision to increase the major banks’ mortgage “risk weights” from July next year – as recommended by the financial system inquiry – forcing them to set aside more capital to write home loans.

Like both Westpac and Commonwealth, NAB said the rise had been bought about by the changed requirements for how much capital banks are required to hold. Clearly, the banks have put their shareholders above their customers.

The nearly unanimous rate hike by the big three banks is perceived as a signal of tightening financial conditions, or a shortage of funds to lend.

The overall satisfaction level of the home loan customers of the big four banks in the 6 months to September 2015 was 80.0%, which although up from 78.2% 12 months ago, is well below the other major banks.

NAB raised rates on its standard variable loans to 5.6 per cent, effective November 12. The Bank of Melbourne increased satisfaction by 5.8% points over the year (to 87.0%), Teachers Mutual was up 5.2% points (remains market leader on 95.3%), Bank SA increased by 4.3% points (to 87.7%) and Bendigo Bank was up by 2.0% points (to 89.9% ).

NAB personal banking boss Gavin Slater said earlier today that the decision was “carefully considered” in the wake of the regulatory changes this year.

“I don’t want to be an apologist for them, don’t get me wrong, but they are all making commercial decisions”, Mr Byres said.

“In this instance, the industry has a clear cut rationale to lift home loan interest rates independent of the Reserve Bank, thanks to APRA’s directive to raise additional capital”.

Pointing to various studies that show Australians don’t typically switch banks when they are offered a better price, he said customers “tend to be fairly passive in that respect… it just doesn’t seem to be the nature of the Australian bank customer to switch and shop around actively”.