Australian major banks' recent increases in home loan rates are credit positive for the banks, Moody's said.
The rating agency said higher home loan rates underline the strong pricing power of the banks, a key factor supporting their profitability. The rate increases will help mitigate the negative effects of rising wholesale funding costs, slower credit growth and higher regulatory and compliance costs for the banks.
The Moody's report came after Australia & New Zealand Banking Group Ltd. and Commonwealth Bank of Australia on Sept. 6 raised their home loan rates by 16 and 15 basis points, respectively. The banks' decision followed a similar move by Westpac Banking Corp., which raised its rates by 14 basis points in late August. Earlier in 2018, small and midsize Australian lenders increased their home loan rates in response to higher wholesale funding costs.
The rating agency said it does not expect the rate increases to result in a material growth in loan delinquencies or credit costs because labor market conditions are likely to remain favorable.
Meanwhile, National Australia Bank Ltd. took a different route and opted to hold its standard variable rate for home loans at 5.24%.