Keystart Loans becomes the latest lender to raise home loan rates.
The state government-run affordable housing scheme is traditionally a low cost lender, but has had to move to raise rates following the rise in official rates last week.
Within days of the Reserve Bank announcement last Tuesday that official rates would rise 0.25%, all of the major banks lifted variable interest rates by the full 25 basis points.
Today, Keystart Loans copied with its home loan rates rising to 5.24% for existing customers and 6.02 per cent for all new customers. The rate changes come into effect from mid-November.
Keystart chief executive John Coles said while the organisation was keen to maintain its position as a low cost lender, it "does not have unlimited funds to lend".
Keystart is a government scheme which allows home buyers to take out a loan with little deposit. However, due to recent global financial issues, the sheme recently increased its minimum deposit limits from 2 per cent of the home's value to 4 per cent.
This level is still considerably lower than the 5% to 20% that most mainstream lenders require.
About 65,000 West Australians have taken out Keystart loans since it began in 1989, including about 5300 in the last financial year.
Last Tuesday the Reserve Bank moved to lift official interest rates for the first time in 19 months, following better than expected jobs and housing data. The cash rate is now 3.25% and many economists predict more rises in the coming months, agreeing that the official rate will probably rest at around 5.25% by this time next year.
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