More than 20 mortgage lenders increased their respective loan rates in the past six weeks despite the unchanged status of the official cash rate. According to mortgage and insurance analyst Canstar, the 2.26 per cent spread between the highest and lowest standard variable rate is higher than the official cash rate at two per cent.

The rise in rates is driven by rising costs to wholesale funding at a time when the lenders also need to build up large capital reserves to meet new prudential rules. It serves as a response to increased hedging and funding costs.

One of the banks that recently increased its rates is Macquarie Bank, which raised its rates on its Basic Flyer variable owner-occupied loans by 50 basis points to 4.64 per cent. Mortgage House also increased its advantage variable by 45 basis points to 4.64 per cent.

Commonwealth Bank, Westpac, National Australia Bank, and ANZ Bank have all increased their rates for business borrowers in response to higher funding costs and tighter regulation.

Regional lender Bank of Queensland also lifted interest rates for housing investor loans by 25 basis points while Adelaide Bank is scrapping its maximum 80 per cent loan-to-valuation limitation for investment properties in the Sydney metropolitan area.

Three more banks – the Bank of Melbourne, St. George Bank, and Bank South Australia – are going to announce next month that they are changing the way interest-only loans are calculated for new and existing customers. It will now be based on the outstanding balance on the day of calculation and will be charged monthly.

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