National Australia Bank has lifted its variable mortgage rate by 17 basis points to 5.60 per cent per annum.

It follows Westpac raising by 20 basis points last week, and the Commonwealth Bank yesterday raising its variable rate by 15 basis points.

NAB blamed market conditions as well as regulatory changes which require the major trading banks to increase the amount of capital they hold against their home loan portfolios.

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NAB blamed market conditions as well as regulatory changes which require the major trading banks to increase the amount of capital they hold against their home loan portfolios.

NAB’s head of personal banking, Gavin Slater, said the decision was not easy, but was the right decision for the long term.

“We know we have to balance the interests of our customers with the needs of our more than 550,000 shareholders,” Mr Slater said in a statement to the ASX.

“Regulatory changes on capital requirements also increase the costs associated with providing home loans.”

NAB’s raised interest rate on all new and existing variable home loans will be effective from Thursday, November 12.

In May, the NAB tapped shareholders for $5.5 billion in capital raising to boost its regulatory buffer to new levels that bank regulator Australian Prudential Regulation Authority (APRA) has demanded be “unquestionably strong”.

RBA will not welcome decision

Sally Auld from JP Morgan said while the RBA will not be surprised by bank’s raising their rates, it is not something that will help get the economy back on track.

“This is happening at a time when the RBA has already told us they are quite worried about risks around local property markets, both residential and commercial,” she said.

“So, I suppose the argument would be that is this necessarily what you want — effectively a tightening in credit conditions in a sector that the RBA has expressed some concern about as it is.”

John Symond, the founder and executive chairman of Aussie Home Loans told ABC NewsRadio that there will now be “a flurry of similar increases by just about every lender out there”.

“Today, I’m tipping that the Reserve Bank will move down to equalise and offset the perceived interest rate increases by the banks to ensure that borrowers are not disadvantaged.”