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NATIONAL Australia Bank (NAB) has raised its variable home loan rate by 0.29 per cent to 9.27 per cent, making it the first big bank to raise rates since the official interest rate hike on Tuesday.

NAB`s rate rise is higher than that by the Reserve Bank of Australia (RBA), which raised official interest rates by 0.25 per cent to 7.25 per cent.

NAB`s new rate will be effective from tomorrow.

“We have a responsibility to balance the needs of our shareholders as well as our customers," NAB executive director and CEO, Ahmed Fahour, said.

“Escalating wholesale funding costs have been impacting NAB since August 2007. During February this year, the cost of both short and long term wholesale funding rose to their highest levels in a decade.

“Unfortunately this means the increase in the RBA’s cash rate by 0.25 per cent does not reflect the true cost of funding a home loan. Even with the additional 0.04 per cent change on variable rate products, NAB is continuing to absorb a significant portion of the increased wholesale funding costs,” Mr Fahour said.

Mr Fahour warned the bank was continuing to watch the market closely and would "adjust our rates further if the increased wholesale funding costs do not subside``.

Adelaide Bank Ltd, which has merged with Bendigo Bank Ltd, has already raised its wholesale mortgage rates by 40 basis points.

In a briefing to investors today, St George Bank boss Paul Fegan admitted his bank was also considering a 40 basis point rise.

The other major banks, Commonwealth Bank of Australia, Westpac Banking Corporation and ANZ Banking Group, have all said their rates are under review.

With AAP

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