Get ready for mortgage hit

HOME loan borrowers should brace for the first round of interest rate hikes out of cycle with the Reserve Bank in a year, analysts say.

It comes as banks grapple with rapidly- rising interest rates in the US and increasing global funding costs.

Regional lender Suncorp Bank yesterday announced it would hike rates on variable mortgage products in a move unprompted by the RBA.

Suncorp is hitting owneroccupier borrowers with a rate rise of 0.05 percentage points, taking the bank’s standard variable rate to 5.6 per cent.

Investors will cop a 0.08 percentage point hike, taking the standard variable rate to 6.07 per cent.

Borrowers with variable interest- only loans will be slugged with hikes of 0.12 percentage point – to 5.77 per cent rate for owner occupiers and 6.49 per cent for investors.

Suncorp said small business borrowing rates would also rise, by 0.15 percentage points.

It comes amid widespread expectations the US central bank will this week continue on its rate- hike march.

The US Federal Reserve will almost certainly raise the target range for its cash rate by 0.25 percentage points overnight Wednesday.

That means the target range would be 1.5 per cent to 1.75 per cent – higher than Australia’s cash rate of 1.5 per cent for the first time in more than a decade.

The last time the cash rate was increased in Australia was Melbourne Cup Day in 2010, when it hit 4.75 per cent.

Most of the major banks hiked standard variable interest rates early last year, then hit investors with further rate hikes later in the year.

Suncorp banking chief David Carter said yesterday that funding costs had been “steadily rising since the end of October”.

“This has been driven by the outlook for US interest rates, as well as domestic factors,” he said.

Mr Carter said the threemonth bank bill swap rate – a key benchmark for funding costs – had risen 0.2 percentage points.

“This increase results in higher interest costs to our wholesale funding, as well as our retail funding portfolio, such as term deposits,” he said.