St George Bank has become the second most expensive lender behind Citigroup after it lifted its variable interest rate by 0.1 per cent to 9.47 per cent yesterday. The controversial move came ahead of today's Reserve Bank board meeting in which official rates are expected to be kept on hold.
St George's acting head of retail banking, George Beatty, defended the increase, saying that the bank was under funding pressures.
"We have sustained increased funding costs for the last nine months, and we continue to absorb some of this increase along with our customers," he said.
"However, similar to shop owners who increase their prices to reflect the cost of their goods, we also need to reprice loans to reflect the increased cost of funding those loans."
The Australian Prudential Regulation Authority has found that St George is more dependent on securitisation, a process in which mortgages are bundled together and then sold to investors, to fund its lending than the four major banks.
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