Nab Move Ups Heat On Westpac Rate

The Age

Thursday March 27, 2008

Danny John, Sydney

WESTPAC is under pressure to increase its main home-loan interest rate after National Australia Bank increased its standard variable rate.

NAB on Tuesday increased the rate by 9 basis points from 9.27%, leaving Westpac as the only bank in the top five at 9.27%.

NAB moved after failing to contain the cost pressures of borrowing from international markets to underwrite its mortgages. It was the second time in three months the bank was forced to increase its rates.

With the banks facing a squeeze on profit margins because of the difference in what they are charging for home loans and the price of funding them, analysts indicated that Westpac would not be far behind NAB in going again.

JPMorgan said the decision by one of its major competitors meant it was likely Westpac had room to move by as much as 10 basis points, although market watchers say that would give Commonwealth Bank a slight advantage in the race to pull in business with its 9.32% offering.

JPMorgan's banking team said NAB's decision to go low in the latest Reserve Bank rise on March 4 had effectively spiked the sector's plans to go up by as much as 15 basis points.

This was the amount needed to cover the rise in borrowing costs caused by the global credit crunch, the investment bank said.