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SYDNEY, Jan 24 (Reuters) - National Australia Bank said on Thursday it will raise mortgage rates by 12 to 16 basis points as it responded to “sustained increases” in funding cost, adding to similar hikes by its peers in a further squeeze for indebted households.
NAB was the only one of Australia’s Big Four banks to not lift its mortgage rates last September as it tried to win public support following revelations of widespread misconduct in the sector.
However, increasing wholesale funding costs has forced the lender to rethink its decision.
NAB will raise principal and interest rates for owner-occupiers by 12 basis points, effective Jan. 31, to 5.36 percent while rates on interest-only mortgage products will go up by 16 basis points, it said in a statement.
Westpac, Commonwealth Bank of Australia and ANZ Banking Group had raised their mortgage rates by 14-16 basis points in September.
Thursday’s news sent the Australian dollar down about a third of a U.S. cent to $0.7123 as the rate hike is seen as putting pressure on the country’s already indebted households.
The increase is also seen as a de-facto tightening which puts pressure on the Reserve Bank of Australia (RBA) to counter the move by cutting its own cash rate from the current record low of 1.50 percent.
Interest rate futures are pricing in an almost 60 percent chance of a cut by December, a sharp turnaround from expectations of a hike just a couple of months back.
Shares in NAB were down 0.2 percent at A$24.55 in a slightly firmer broader market. CBA, ANZ and Westpac shares were also a shade weaker. (Reporting by Swati Pandey; Editing by Shri Navaratnam)
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