NAB first to pass on RBA rate rise in full

National Australia Bank is passing on this week’s official interest rate rise to mortgage customers in full, it said on Friday, but savings rates were still under review.

After several days of silence from the big four about their interest rates following Tuesday’s 0.5 percentage point increase from the Reserve Bank, NAB released a short statement on Friday afternoon saying home loan interest rates would increase by 0.5 percentage points.

The increase, the fifth rise in variable mortgage rates in as many months, will take effect from Friday next week.

The big four banks are expected to pass the rate rise onto variable mortgage holders.Credit:Paul Rovere

Amid predictions that banks’ profit margins are getting a major boost from the limited pass-through of rising interest rates to savings accounts, NAB’s statement did not announce any changes to its deposit interest rates.

“NAB’s savings and term deposit rates are continually under review,” the bank said.

According to RateCity, if the rate rise is passed on by lenders in full, the average owner-occupier’s monthly repayments will rise by $144 in September, and the average existing customer variable rate for owner-occupiers will be 5.11 per cent.

Since the RBA started lifting rates in May, the cumulative rise in repayments is now more than $1000 a month on an $800,000 loan.

The country’s biggest lender, the Commonwealth Bank, has often been the first of the big four banks to move its rates following an RBA decision.

The Reserve Bank increased official interest rates for a record fifth consecutive month on Tuesday, lifting them by another half of a percentage point as it races to bring inflation under control.

The RBA increased the cash rate to a seven-year high of 2.35 per cent. At the start of May, the cash rate was 0.1 per cent. It is the most aggressive tightening of official rates by the bank since 1994, and the first time it has lifted rates at five consecutive meetings.

NAB’s group executive for personal banking, Rachel Slade, said people with concerns about interest rate changes should contact their bank.

“An early conversation with your bank is so important to staying on track financially,” Slade said.

“When customers speak to our NAB Assist team early, we see that 90 per cent of our customers are back on their feet within 90 days.”

Macquarie analyst Victor German this week argued the cycle of rising interest rates would significantly widen banks’ net interest margins (NIM), which compare funding costs with banks’ revenue from loans.

German said that of the big four, Commonwealth Bank would experience the biggest boost in its NIM, which he predicted would receive a 27 basis point benefit between this financial year and 2025.

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