Today we announced we are raising our variable home loan interest rates by 0.10% p.a. For a six month Term Deposit account there will be an improvement on interest rate with an increase of 0.20% p.a. Both changes are effective Monday, 20th February 2012.
We have seen the Bank’s wholesale funding costs remain high and continue to increase as previous long term funding matures and is replaced with new funding at significantly higher cost. At the same time, due to intense competition for retail deposits, the cost of deposits compared to the official cash rate is extremely high.
In setting rates we are conscious of the need to balance the interests of our borrowers and depositors. With volatility in global financial markets ongoing, we remain cautious in our approach and continue to manage our business conservatively to protect the interests of all of our stakeholders.
As reported in the February Reserve Bank of Australia Statement on Monetary Policy, “Bank funding costs have increased relative to the cash rate over the past six months. In particular, there have been increases in the spreads of term deposits due to competition for deposit funding, an increase in the compensation required by investors globally for bank credit risk and an increase in the cost of foreign exchange hedging”.
It is important for banks to continue to price competitively and to maintain profit levels. The majority of our profits are returned to 800,000 Australian shareholders, and millions more via their superannuation funds. The remainder of our profit is reinvested in supporting lending growth and providing more than 11 million customers with world leading banking systems and products.
How will the changes to Variable Home Loan rates affect me?
How will the changes to Term Deposit rates affect me?