NAB lifts home loan rate for the second time in a month. This time by 0.09%.
It isn't much. Westpac is expected to follow.
Treasurer Swan says
"Banks that are able to shield their customers as much as possible from the fallout of the US sub-prime crisis will be rewarded," Mr Swan said.
"Similarly, those that don't act reasonably are likely to be punished and lose customers to their competitors.
"We encourage them (homeowners) to shop around and vote with their feet if they think they can get a better deal from a different financial institution."
Banks cannot allow rates to rise and fall linearly with interest rates because of profit margins. When interest rates are very low, say at 3%, then if a bank has a 1% rate extra, its profit margin is 25%. But, if interest rates are at 9% and the bank has 1% extra, then it's margin is only 10%. Banks measure their profits on the margins, because that is where they compete, capital being a resource.
Swan knows this, but still says something stupid in the hopes people will not know that he is supporting the practice. Swan is not telling customers to leave the NAB.
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