NAB succumbs to cost pressures and hikes rates

National Australia Bank (NAB) has announced that, effective Thursday, 31 January, it will lift its mortgage rates by up to 16 basis points.

NAB’s changes are as follows:

• An increase of 12 basis points on its owner-occupier principal and interest home loan, from 5.24 per cent to 5.36 per cent
• An increase of 16 basis points on its investor principal and interest home loan, from 5.80 per cent to 5.96 per cent
• An increase of 16 basis points on its owner-occupier interest-only home loan, from 5.77 per cent to 5.93 per cent
• An increase of 16 basis points on its investor interest-only home loan, from 6.25 per cent to 6.41 per cent

NAB’s chief customer officer of consumer banking, Mike Baird, said the bank sought to strike a balance between rewarding customer loyalty and shareholder outcomes and responding to sustained increases in funding costs.

NAB’s interest rate increases come after the bank announced last September that it would hold its standard variable rate for “as long as possible”, despite pricing changes from ANZ, the Commonwealth Bank and Westpac.  

“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.”

However, RateCiuty research director Sally Tindall took a more cynical view in reaction to NAB's rate hikes.

“NAB tried to put their customers first, but it appears profit has won out in the end,” she said.

“NAB’s previous decision to keep rates on hold was designed to win back the trust of their customers. It was also a play to get new customers in the door.

“The strategy appears to have worked. In October 2018, NAB surpassed ANZ in terms of home loan market share. They now have the third largest home loan book, according to APRA data."

NAB’s move follows a 20 basis point rate hike by its subsidiary UBank, with the Bank of Queensland (BOQ) and Virgin Money also recently announcing increases, which marked the second wave of out-of-cycle rate changes. 

Last year, several lenders, including ANZ, CBA and Westpac, lifted rates, all citing the sustained increase in wholesale funding costs. 

[Related: Lender announces mortgage rate hikes]