THE Bendigo Bank has lifted its residential variable home loan interest rate by a whopping .15 per cent, higher than ANZ of Wesptac, a week before it unveils its interim profit announcement.
The ANZ and Westpac were chastised for lifting their rates .1 and .06 percentage points in the past few days.
In lifting the interest rate to 7.45 per cent, bank managing director Mike Hirst said current banking margins are not sustainable.
“This is not a popular move, we know that, but it is the right thing to do to restore a proper balance between depositors, borrowers, the bank’s shareholders and our community partners," he said.
"At current funding cost levels that balance is out."
Mr Hirst said independent assessments by UBS1 show that banks are making no money on new mortgages written in the current funding environment.
“It gives banks no incentive to freely lend to borrowers, as we are not covering the risks we’re taking or investment in operations and people we’re making,” he said.
“Banks are currently subsidising mortgages and if you look at the traditional role of a bank this makes no sense and is unsustainable.
“Banks were formed as a means to share wealth. Banks accept cash from people with surplus money (depositors) and lend to people who lack cash (borrowers), but who can add value to it once obtained by building a house or investing in a business and generating growth in the economy. It is critical that this flow of credit continues."
Mr Hirst said banks had a choice to make: adjust the pricing on loans or restrict lending.
He said the latter option would have significant implications for the economy and would not be the right thing to do at this point in time.
“Our bank must return to a pricing position which is sustainable. In doing that we must, of course, remain competitive while reflecting our unique value proposition," he said.
"This approach has always seen us win new business and meet the needs of customers in the communities in which we operate."
The bank will unveil its interim profit result on Monday at 10am.
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