A key challenger bank hikes its floating rates in an out-of-cycle rise that includes their overdraft rates, ending the rate advantages it had with these types of lending

“Expect more.”

That used to be the TSB Bank tag line. And now that applies to the bank’s floating mortgage rate.

From Thursday June 22, the interest rate for these loans will be raised by +15 basis points to 5.80%.

That will bring it up to the levels of most other banks and the large Aussie-owned banks. Only Kiwibank and the Co-operative Bank now have floating rates materially lower.

The rate for TSB Bank’s revolving credit lending will be raised the same amount to the same new level.

The rate for TSB’s ‘Lifestyle’ reverse equity mortgages will also rise by +15 bps to 7.06%.

The last time TSB Bank raised its floating interest rate for borrowers was in late March when the bank added +11 bps to this rate.

Out-of-cycle rate changes are now the favoured way for banks to change these floating rates, separating them from the Reserve Bank’s Official Cash Rate changes.

Overall, banks have $50.7 billion of mortgages on floating rate terms.

In its latest financial results for the year to March 2017, TSB Bank revealed an after tax profit fall from $61.6 mln to $46.3 mln.

These same results show they have $3.85 bln in residential mortgages, which is 82% of their total loans and advances.

TSB Bank has also increased the interest rate for its Personal Secured Overdraft which has gone from 11.39% to 11.54%, a rise of 15 bps. (Its Personal Unsecured Overdraft rate is up the same amount to 15.39%).

For perspective, here is the recent change history for TSB Bank’s floating rate product:

TSB Bank change history Change Floating
  % %
Start of 2016   5.74
March 10, 2016 (the -25 bps OCR reduction) 0.00 5.74
March 11, 2016 -0.20 5.54
August 16, 2016 (the -25 bps OCR reduction) 0.00 5.54
November 22, 2016 (the -25 bps OCR reduction) 0.00 5.54
February 9, 2017 (the no-change OCR decision) 0.00 5.54
March 14, 2017 +0.11 5.65
March 23, 2017 (the no-change OCR decision) 0.00 5.65
May 11, 2017  (the no-change OCR decision) 0.00 5.65
June 22, 2017 +0.15 5.80

Here is a snapshot of the current floating rates offered by key retail banks and their recent change history:

below 80% LVR as at
Dec 31, 16
as at
Jan 31, 17
as at
Mar 31, 17
as at
Jun 12, 17
      %  
5.59 5.69 5.79 5.79
ASB 5.65 5.80 5.80 5.80
5.64 5.79 5.90 5.90
Kiwibank 5.25 5.40 5.55 5.70
Westpac 5.65 5.65 5.75 5.84
         
5.55 5.55 5.65 5.75
HSBC 5.59 5.59 5.59 5.79
HSBC 5.59 5.54 5.79 5.79
5.54 5.54 5.65 5.80

TSB Bank has not made term deposit rate changes at this time.

All current mortgage rates are here.

All current term deposit rates are here and here.