14-Dec-2016 • Corporate

ME today announced variations to its fixed and variable home loan rates.

The Bank will decrease its 1-year fixed owner occupier and investor loans by 10bps to 3.89% p.a. (comparison rate 4.85% p.a.^) and 3.99% p.a. (comparison rate 5.32% p.a.^) respectively, while increasing its 2-year owner occupier loans by 10bps to 3.94% p.a. (comparison rate 4.77%p.a.^) and its 3-year fixed owner occupier and investor loans by 15bps to 3.99% p.a. (comparison rate 4.70%p.a.^) and 4.09% p.a. (comparison rate 5.09%p.a.^) respectively. All changes are effective 15 December 2016.

ME is also increasing its variable home loan reference rates by 10bps effective 4 January 2017, affecting new and existing investor and owner occupier loans.

ME’s standard variable rate for owner occupiers with LVR 80% or less will be 5.03% p.a. (comparison rate 5.05% p.a.^), which is 22bps lower than the average of the major banks and 42bps lower than the average of the regional banks*.

Home loan rates below 4% p.a. are still available from ME including 3.94% p.a. (comparison rate 4.35%p.a.^) on ME’s flexible home loan with member package for owner occupiers borrowing between $400,000 and $700,000 with LVR 80% or less (Member package fee of $395 applies).

ME CEO, Jamie McPhee, said the changes were due to increases in funding costs and the need to remain within APRA’s limit on investor lending growth.

“The rate banks pay to hedge the cost of three-year fixed mortgages has increased 40 basis points since August, while variable home loan funding costs have been increasing as banks work toward the regulatory need to hold longer-term stable sources of funding.

“ME is moving to a new regulatory regime on 1 January 2017 (the Liquidity Coverage Ratio), requiring it to compete for more deposit funding.

McPhee also said Australia’s smaller banks were still subject to higher funding costs relative to the majors.

“The major banks get a credit rating upgrade due to their ‘too big to fail’ status in turn giving them access to cheaper funding, while mortgage risk-weights remain distorted with standardised banks having an average mortgage risk-weight of 39% while ‘advanced’ banks enjoy a mortgage risk-weight of 25%.

“Despite the disadvantages, ME’s standard variable home loan for owner occupier borrowers with LVR 80% or less remains lower than the major banks as it has since we became a bank in 2001. In addition ME continues to offer some of the highest deposit rates in the market including eight of the top 12 term deposit rates between one and 12 months.

“We believe these rate changes strike a fair balance between rising costs and the needs of depositors, borrowers and our industry super fund shareholders and their members.”

– ends –

*Bendigo Bank, Bank of Queensland, Suncorp Bank
^Home loan comparison rates calculated on a loan of $150,000 for a term of 25 years, repaid monthly. WARNING: These comparison rates are true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in different comparison rates. Terms, conditions, fees and charges apply. Applications are subject to credit approval.