* NAB raises home investor loans by 25 bps to 5.8 pct
* Move follows strong growth in investor lending segment
* Owner occupier rates up by 7 bps to 5.32 pct
(Writes through, adds investment manager, analyst quotes)
By Swati Pandey
SYDNEY, March 16 National Australia Bank
became the first of the country's Big Four lenders to
raise mortgage rates on Thursday, a move that in part will be
welcomed by regulators desperate to cool runaway real estate
NAB, Australia's No.4 lender by market value, raised
interest rates on residential investment loans by 25 basis
points to 5.80 percent to clamp down on the "strong growth" in
the segment, it said in a statement.
But it also raised owner-occupier loans by 7 basis points to
5.32 percent, a move that analysts said could draw flak from
consumers and politicians.
Earlier this week, a senior central banker signalled
regulators were ready to impose tighter lending restrictions to
ward off risks in a housing market that has seen prices grow at
their fastest since 2010.
Home prices in major cities jumped 11.7 percent in the year
through February, while in Sydney they have shot up 18.4
While authorities should welcome moves to dampen speculation
in property, high loan rates for home occupiers could risk
hurting the broader economy at a time when it still needs
"The major surprise was the increase in owner occupier
rates, coming at a time when consumer spending is relatively
weak," said Shane Oliver, head of investment strategy at AMP
Oliver said there was a danger that higher home loan rates
for owner occupiers could weaken the economy to a point that the
central bank is forced, reluctantly, to cut the policy rate
already at a record low.
"If we see a few more of these out of cycle rate hikes it
could contribute to another rate cut by the RBA."
The Reserve Bank of Australia (RBA) kept its policy rate at
1.50 percent for an eighth straight month in March and has
signalled a steady outlook for the year ahead.
RBA governor Philip Lowe recently spoke about the danger of
a debt-fuelled boom and bust, adding further interest rate cuts
would not be in the national interest.
But an increase in official cash rates is also undesirable
as the economy still needs support with the jobless rate at a
13-month peak and wage growth at its weakest in nearly two
For banks, rising cost of borrowing, stiff lending
competition and onerous regulations mean they are forced to push
interest rates higher to protect their profitability.
"Banks are trying to get it across to politicians and the
public that higher regulatory requirements come at a cost and
banks are going to use their repricing powers to limit their
damage," said Morningstar analyst David Ellis.
HOT PROPERTY MARKET
The value of home loans rose 1.5 percent in January to stand
11 percent up annually, latest data showed. Growth was largely
driven by a 4.2 percent jump in the value of loans to investors
in January alone, with the annual pace surging 27.5 percent.
It is this boom in investment home lending that regulators
want to contain.
Already, the major banks share of new mortgages written has
sunk to 65.25 percent from a peak of 72.2 percent in August.
"If the major banks lose market share at this high end of
the cycle they are actually doing themselves a favour. So if and
when the housing cycle turns down they won't be stuck with a lot
of these more risky home loans," Ellis added.
On Wednesday, Commonwealth Bank of Australia, the
nation's largest mortgage provider, and its subsidiary Bankwest
said they will raise interest rates and toughen lending
conditions for investment property buyers.
Westpac and ANZ declined to comment on the future course of
rate action, while CBA could not immediately be reached.
(Additional reporting by Wayne Cole and Cecile Lefort; Editing
by Simon Cameron-Moore)