Interest rate lift ‘not for profit’

NATIONAL Australia Bank chief executive Andrew Thorburn insists the bank lifted interest-only mortgage rates to meet regulatory requirements, not to make more money.

The consumer watchdog is looking into whether banks are trying to pass on the cost of the Federal Government’s bank levy, but Mr Thorburn told MPs yesterday that NAB rate hikes were mainly a response to the Australian Prudential Regulatory Authority’s (APRA) limit on new interest-only lending.

APRA in March told the big banks to limit interest-only lending to 30 per cent of new mortgages in an effort to address increasing risks caused by high household debt.

“If we wanted to maximise profits, we would not have reduced principal and interest rates,” Mr Thorburn told MPs in Canberra.

Chief financial officer Anthony Cahill at one point told the House of Representatives standing committee on economics that NAB’s sole focus in moving rates was to meet APRA’s 30 per cent limit.

He amended this to “a key focus” under questioning by committee chair David Coleman, who accepted Mr Cahill had accidentally misspoke.

NAB’s overall home loan book is 41 per cent interestonly but the APRA limit applies only to new lending.

Mr Thorburn and other banking executives warned in May that the banking levy introduced in the federal Budget was a levy on staff, customers and shareholders.

The Australian Competition and Consumer Commission is monitoring whether the levy is unfairly passed on to customers.