Greater Joins Rest On Rates

Newcastle Herald

Friday February 1, 2008

By GREG WENDT Business Editor

HUNTER-based Greater Building Society has followed other major Australian banks and building societies in increasing its home loan interest rates.

The Greater's standard variable home loan interest rate rose 0.15 per cent to 8.35 per cent, from yesterday.

Chief executive John Arnold said that while the Greater was not directly linked to the United States subprime mortgage crisis, the situation had increased the cost of sourcing funds across the globe.

"We have absorbed the increased cost of lending for the benefit of our members for as long as we could," Mr Arnold said.

"As the money market has not returned to more normal margins, the Greater, like other lenders, has had to pass on some of that increased cost."

Mr Arnold said he hoped deferring the rate increase until now had provided some relief to the building society's customers over the Christmas period.

The major banks raised their variable home loan rates last month, independent of the Reserve Bank of Australia, in response to the fallout from the subprime mortgage woes putting pressure on the international money market.

The Reserve Bank is strongly tipped to raise the official interest rate when it meets next Tuesday.

Money markets were factoring in yesterday a 60-70 per cent chance of a rise in the official rate in response to higher-than-expected inflation in the December quarter weighing on the economy.

Analysts predict the central bank would raise the official rate by another quarter of a percentage point to 7 per cent, its highest point in 11 years.

© 2008 Newcastle Herald

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