The Newcastle Permanent Building Society has joined another Newcastle based lender and raised its variable home loan interest rate independently of the Reserve Bank.
The Perm announced on Wednesday afternoon its variable home loan rate will increase by 0.09%. The move comes after the Greater Building Society announced yesterday its variable home loan rate would rise by 0.10%. The big 4 banks have also raised their variable home loan rates since the Reserve Bank met last week and left rates unchanged.
Newcastle Permanent CEO Terry Millett says the decision to raise rates was necessary so the institution remains competative in both the deposit and lending range.
” With the major banks increasing their home loan rates by up to 0.10%, there is a flow-on effect to the customer deposit rates they offer and it is extremely important that Newcastle Permanent remains highly competative across both our deposit and lending products.”
“Almost 80 per cent of our home loan funding is sourced from our members’ retail deposits. The major banks have driven up the costs of retail deposit funding via intense price competition in deposit rates, and this increases the cost of the money that we use to fund our home loans.”
Mr Millett has conceded the move not be popular with some customers.
“We understand that some of our members with variable home loans will be disappointed with the decision we have taken, however we must act in the best interests of all our 325,000 members. We need to act to ensure our home loan interest rates are not excessively competative to the extent they are in effect subsidised by our deposit members, which means taking the measures we have today.”
