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.

* Home loan comparison rate based on a $150,000 loan over 25 years.  Fixed loan comparison rate applies only for loans with an LVR of 80% or less and a loan amount of $150,000 to $249,999.  WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Interest rates are on a per annum basis. Rates are correct as stated and subject to change without notice. Rates shown are for new loans and do not apply to switches or internal refinances.

Home Advantage Variable rates include discounts shown from the Standard Variable rate. Home Advantage Living Equity rates include discounts from the Living Equity rate. Discounts are based on total lending in the package. Discount Variable LVR rates are for new lending and include discounts from the Discount Variable Loan Rate.  Discounts are not available in conjunction with any other interest rate discount or special offer. All fixed rates are fixed for the period stated and revert to the variable rate applying at expiration of the fixed term. To approved applicants only. Conditions, criteria and fees apply.

Loan to Value Ratio (LVR) is the loan amount divided by the value of your security property (determined by Heritage Bank at assessment), multiplied by 100. Owner Occupied loans have a maximum LVR of 95%, Investment loans have a maximum LVR of 80% and Living Equity has a maximum LVR of 80%. Heritage is not accepting any new investment applications until further notice.

This advice has been prepared without taking into account your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation or needs.

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