National Australia Bank (NAB) yesterday became the first big bank to lift interest rates higher than the Reserve Bank's 0.25 percentage point increase, lifting its standard home loan rate by 0.29%.
The increase is 0.04 percentage points above the official increase, but is less than the amount some analysts had predicted.
Ahmed Fahour, head of NAB's Australian business, said the RBA increase "unfortunately" did not reflect the true cost of funding home loans.
The move could be followed by even higher increases from NAB's competitors, with St.George Bank revealing that to cover the full cost of funding its mortgages, it would need to raise rates by 0.4 percentage points.
NAB, the country's second-largest bank, also warned that loan costs could increase further, as the costs of borrowing from international markets continues to soar. The banks have been absorbing approximately half of the difference, with the other half passed on to customers during rate rises in January and February.
Adelaide Bank has already raised its rates by 0.4%. Other banks, including St.George, have also indicated they will follow suit.
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