July 10, 2018 / 6:41 AM / 4 months ago

UPDATE 1-Australia's Macquarie hikes home loan rate, 'big four' eyed

* Macquarie, Homeloans & ING hike mortgage rates

* Eyes on steps by big 4 banks, who control 80 pct of market (Adds Homeloans & ING rate rises, impact on margins for big banks)

By Byron Kaye and Paulina Duran

SYDNEY, July 10 (Reuters) - Australia’s biggest investment bank Macquarie Group hiked home loan rates even as the country’s official rate remains steady, in a sign funding costs were rising and larger rivals such as the “big four” retail banks could follow suit.

Rate hikes by top lenders would pressure the housing market that is already in retreat following a series of tighter regulations, and anger consumers and others amid a public inquiry into finance sector misconduct in Australia.

Macquarie said on Tuesday on its website that it was raising mortgage rates by 6-10 basis points, but did not provide an explanation for the move, which comes a week after the Reserve bank of Australia kept rates on hold at its monthly meeting. Rates have been at a record low since August 2016.

“We’re going to see the higher funding costs get eventually passed through by the major retail banks, which will further squeeze households in terms of their outlook for consumption,” said Kerry Craig, Global Market Strategist, J.P. Morgan Asset Management. “Do we see out-of-cycle rate hikes coming through from other banks in Australia? Yes, probably.”

Smaller players had already been raising their home loan rates in recent weeks to protect their margins.

Australia-listed Homeloans Ltd increased rates by up to 14 basis points for investment housing loans “as a result of increased funding costs”, according to a spokeswoman.

Dutch lender ING Groep NV increased its variable residential home loan rate by 10 basis points in recent weeks to “adjust to market changes”, a spokeswoman said via email.

Banking analysts at Citigroup estimate higher funding costs will push Australia’s four largest lenders, which dominate about 80 percent of the A$1.6 trillion ($1.19 trillion) mortgage market, to raise rates by September.

Westpac and Australia and New Zealand Banking Group , Australia’s No. 2 and No. 4 lenders by market value, declined to comment on their rates, citing legal reasons.

Spokespeople from top lender Commonwealth Bank of Australia , and the third-biggest lender, National Australia Bank Ltd, did not respond to emails seeking comment.

Short-term funding cost market indicators have more than tripled since August 2017 while funding through deposits and long-term wholesale funding costs have also increased marginally in recent weeks.

Higher funding costs would cost the four major banks a minimum 2 to 4 percent of their net interest margins, a key measure of profitability, according to banking analysts. ($1 = 1.3399 Australian dollars) (Reporting by Byron Kaye in Sydney, additional reporting by Swati Pandey; Editing by Himani Sarkar and Muralikumar Anantharaman)

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