Funding cost pressures force Heritage rate increase
Heritage Building Society will increase its standard variable interest rate by 0.39% from next Monday – a decision that was extremely difficult but essential to protect the long-term interests of members, CEO John Minz said today.
Heritage’s standard variable rate will increase to 7.44%
Mr Minz said even after that rise, Heritage’s rate remained significantly below those of the big four banks, and in line with other similar financial institutions.
He said Heritage was facing the same cost increases as other institutions in sourcing the funds to lend out to members, which was putting pressure on profitability.
“The costs of obtaining funds for our loans have been going up and up during the last two years. We have resisted passing on those costs to borrowers through that period, but the simple fact is that we can no longer afford to keep doing so,” Mr Minz said.
“Funding costs are particularly an issue for us as we don’t have the economies of scale that the big banks enjoy.
“To keep giving our members the benefits they have enjoyed for the past 135 years, we must stay strong, profitable and sustainable.
“This was a tough decision, but one that we believe is in the best long-term interests of the Society and our members.”
Mr Minz said the rate rise would be effective from 22 November; however, to ease the impact on borrowers, repayments will not change until their first repayment date after 10 February 2011.
“Our rates have always been low, so we remain extremely competitive even after this rise,” he said
“We still offer a much better rate than the big banks - our new rate remains an average of 0.345% lower than those of the four majors.”
Mr Minz said that Heritage had also decided to increase the interest rate payable to members on many of its savings accounts and term deposits.
“We will now be offering even better deals for members on these account, so this is a great opportunity to consider investing with us to take advantage of these deals,” he said.
“For example, we will now be offering hot rates of 6.25% for a 6 month term deposit; 6.30% for 9 months; and 6.35% for 12 months and 24 months.”