Funding costs force interest rate increase at Heritage
The continuing high cost of obtaining funds has forced Heritage Bank to lift its standard variable home loan interest rate by 0.10%, effective from Monday, 2 April.
Despite the increase, the new standard variable rate of 7.04% remains well below the rates offered by the big four banks - Westpac at 7.46%, the Commonwealth at 7.41%, ANZ at 7.36% and NAB at 7.31%.
The change will affect repayments due after 3 May.
CEO Mr John Minz said Heritage had been absorbing the increased costs of funding for some time and had held off a rate increase as long as possible.
"We simply could not continue to absorb those extra costs. Our interest margin is being squeezed both by higher funding costs and fierce competition for deposits domestically," Mr Minz said.
"Heritage must stay financially strong and generate a modest profit to maintain our business model and protect the long-term interests of our customers.
"We have delayed the rate increase as long as possible and kept it as low as possible to lessen impacts on borrowers.
"However, for us to continue providing our customers with the best overall value, this is a necessary decision to ensure the ongoing financial strength of Heritage Bank."
Interest rate increases will take place across all Heritage variable rate home loan products.