NAB hikes mortgage rates

By in Australian Dollar, Australian interest rates

| 71 comments

by Chris Becker

Oh it’s been a fun day so far trading Aussie dollar! First the numberwang unemployment print, now the National Australia Bank (NAB) hiking interest rates out of cycle. Bang comes down the Australian dollar:

From the horse’s mouth:

NAB Chief Customer Officer – Consumer Banking, Mike Baird said the decision to increase rates was not taken lightly as the bank sought to achieve the right balance between rewarding customer loyalty, shareholder outcomes, and responding to sustained increases in funding costs.

“Our decision to hold our Standard Variable Rate since September last year, the only major Australian bank to do so, has led to around $70 million remaining in the households of more than 930,000 NAB customers,” Mr Baird said.

“We wanted to reward our existing customers for their loyalty and held off as long as we could despite being subject to the same increasing wholesale funding costs and market pressures as other major lenders.

“We have been deliberate in our approach to limit the impact on owner occupier borrowers by keeping their rates as low as possible to encourage both new and existing customers to pay down their loan sooner.

Nearly 1 million customers do not trump the shareholders who need their dividend to remain intact.

Who’s next?

Comments

  1. Peachy

    Our decision to hold our Standard Variable Rate since September last year, the only major Australian bank to do so, has led to around $70 million remaining in the households of more than 930,000 NAB customers,

    Translation: $30m of lost PBT is the pain threshold. We’ve screwed depositors for $40m of the $70m we granted the borrowers, but once the net cost hit $30m, we’ve got to protect the shareholders.

    PS. UBank steady at 3.59%

    • chino

      Yep BBSW trading higher than at any other stage in the quarter for the past 2 years!

      24/01/2018 1.78
      24/04/2018 1.745
      24/07/2018 1.69
      24/10/2018 1.7
      24/01/2019 1.785
      24/04/2019 2.055
      24/07/2019 1.9682
      24/10/2019 1.9234
      24/01/2019 2.0811

      • DominicMEMBER

        It’s a beautiful thing: 100bps from here and the sucking sound will be deafening. Cue panic at the RBA as they slash 50bps …. and then another 50bps …. and then head to the Govt-approved multi-faith prayer room.

    • DominicMEMBER

      You got the ‘cue Peachy’ bit right but I’m not sure about U-Bank’s headline mortgage rate — 3.59% has almost become an entrenched part of the name. Hoist by their own petard!

    • NikolaMEMBER

      I did already and if not Feb then March starts to look more and more like a perfect candidate. NAB will probably open the gates for number of smaller lenders to announce hikes.

      • Arrow2MEMBER

        Feb way too soon given employment numbers. Phil Lowe doesn’t actually want to cut and employment numbers give him an excuse not to.

    • Divide et impera

      A lone voice in the wind.

      RBA cutting rates will unleash economic Armageddon on the Australian economy via inflation and currency devaluation. Would be harmful to economic activity and demand – this is not 1992.

      Further RBA cutting rates into retail banks raising rates would look hideously incompetent – right when the commission report is due. Having the RBA cut and retailers raising with ASIC and APRA incapable of addressing the issue would just look like an absolute disaster for the RBA – let alone the LNP.

      People need to seriously start rethinking their interest rate setting strategy – because its like listening to Rene Rivkin talk up the prospects of Swan Beer.

      Honestly – you can download an update to your economic understanding from the Play Store or the App Store for less than $0.99

      Get on it.

      • Mining BoganMEMBER

        Why are so many openly corrupt people doing God’s work?

        Don’t answer. I spent my formative years in a ‘religious’ town. I know the answer.

    • ceeMEMBER

      Read the name as Mike ‘Taird. Amusingly the rest of the excerpt was the ‘taird thoroughly polishing the turd for public consumption.
      Cue Australia Banking Associations Anna Bligh…

    • LSWCHPMEMBER

      He certainly brightened up Sydney nightlife, eh?

      Mike Baird….sucking the joy out of absolutely everything, in God’s name.

      • GavinMEMBER

        Sydney has become so dull I am trying to understand why house prices are so high? Do people really want to move here? I’m somewhat desperate to leave now.

  8. C.M.BurnsMEMBER

    6.41% for Investors on IO from the 31st. That’s a hop, skip and a jump away from 7%. The magic number that I’m sure NAB totally assessed all their mortgage applicants against.

    • mdseeMEMBER

      And when it hops over 7% and all their magical thinking unicorn mortgages go belly up? Not long now

    • Peachy

      Nobody is paying that.

      Take a 2% discount right off the top. This is why I track UBank – filters out the bull crap marketing and reflects all the discounts.

      • LSWCHPMEMBER

        I reckon you’re underestimating the stupidity and overestimating the financial literacy of the average punter.

        Do you think a bank would pointlessly advertise a product that had no customers and made them no money? No, because the only thing that exists for them is the relentless pursuit of money.. There are lots of people…savvy investors snapping up and pouncing on (h/t Nik) bargains…who don’t know any better and are paying those rates.

      • DominicMEMBER

        You need to read the small print: 3.59% is available to only the most gilt-edged borrowers.

        The plebs either get told to f*ck off or they get shown a rate at which UBank is willing to take the risk i.e. 5%+

    • SupernovaMEMBER

      PLUS: Think Aussie banks could be pushed to also raise rates due to Basel Tier II funding costs. APRA requires them to raise an additional $75Billion in Tier II bonds to meet “To-Big-To-Fail” capital requirements…..otherwise QE taxpayer bailouts.

  10. BaldbadgerMEMBER

    Don’t believe it. Isn’t Mike busy on personal leave to deal with ‘family issues’?
    I see people like him around my area and have to try super hard to bite my tongue.

  13. DPM

    So you have a FHB 2 year teaser rate at 3.69% that will jump to 5.36% !!
    That’s a huge jump! Hook the Giddy FHB who has scrapped together the deposit, borrow 6-7x income only to realise that after 2 years their rate jumps to 5.36% and they have difficulty repaying.

    Not to mention that after 2 years fixed they have not made a dent in their principle and by then the economy is in full down swing and their apartment price is down 15%

    Royal commission into banking NOW! Oh wait….

  14. Bitterolcvnt

    Just back from inspecting a terrible property for a multiple IP owner, interest only of course. The costs to rectify should scare them into selling one, but no….the influence of nathan and dymphna is mind boggling. I fear a world of hurt is comming their way.

  15. Mr SquiggleMEMBER

    I don’t understand. If NAB is the last to hike, the others have done so already, so why the change in the AUD?
    Something else is going on….

    • ceeMEMBER

      Think traders just realised how much this puts pressure onto the RBA to lower teh rates.
      Rates are supposed to go up when growth is solid. Rates going up when house prices going down is a big flag that the RBA narrative is cracking.

    • BubbleyMEMBER

      China

      China trade war

      American interest levels rising and economy strethening (ignoring the recent Trump tantrum)

      International reports on Oz economy slowing and high debt levels

      The rose coloured glasses are coming off our mud guard economy – showing it’s shiny on top and covered in crap underneath.