The National Australia Bank has today lifted its variable mortgage rate by 0.09% to 9.36%, blaming increased borrowing costs it faces on international debt markets.
The move reflects a continuing gap – currently at about 0.5% – between official interest rates and the price banks pay to fund debt on the market.
“Current wholesale funding costs are highly volatile and remain well above normal. Bank wholesale funding costs have risen above Reserve Bank increases, and the spread between the Australian 90-day bank bill rate and the cash rate has been substantially higher than the usual spread,” NAB executive director and CEO Australia, Ahmed Fahour says.
“Furthermore we have continued to issue in offshore markets for term funding at these substantially higher spreads, which leads to higher borrowing costs for businesses and mortgage loan customers.”
The variable mortgage rates of the big banks now all sit between 0.2% and 0.3% above the official cash interest rate of 7.25% set by the Reserve Bank of Australia.
On the markets today, yesterday’s strong performance – the S&P/ASX200 lifted 3.7% over the day – has been followed by a mildly positive showing today, bucking a recent trend of following big rises with big falls.
At 12.30pm the S&P/ASX200 is trading 5328.4, up 0.2% on yesterday’s close.
The generally good market conditions over the past day and a half in large part reflect surprisingly strong housing figures recently released in the US by the National Realtors Association.
Just over five million homes were bought in the US in February, a 2.9% increase on the previous month that came when most analysts were expecting a flat performance or a fall.
Having said that, it was not all good news – sales are still down 23.8% on the same time last year, and median prices dropped 8.2% for the month.