AMP Bank has increased interest rates on its mortgages, citing pressure from increasing funding costs.
The rise is 8 basis points for owner occupied principal and interest home loans and 17 basis points for interest only and investor loans.
AMP is today offering a basic variable principle and interest home loan at 4.05%. The changes are effective tomorrow for new business and Monday for existing customers.
The rise is greater than that announced by Macquarie earlier this week of 0.06 of a percentage point for owner-occupier loans rise and investment loans by 10 basis points.
The next move is with the big four — CBA, Westpac, ANZ and NAB — to make an out of sequence lift in rates. The Reserve Bank of Australia is still holding the cash rate at a record low of 1.5%. It’s been unchanged since August 2016.
But the smaller banks are more susceptible to a rapid increase in funding costs because they are more reliant on wholesale funding than the big four.
AMP put the blame for changes on an increase in funding costs.
“We are managing our portfolio in a very active market and our decisions on rates are never taken lightly,” says AMP Bank Group Executive Sally Bruce.
“We have held off passing this cost on to customers for as long as we can and in fact have not increased interest rates for existing customers since June last year.
“With any change, we are focussed on balancing the interests of our customers, the regulator and our business.”
AMP has a three-year fixed rate for owner occupied principal and interest loans of 3.79%.
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