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NAB lifts mortgage rate -

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NAB lifts mortgage rate

Broadcast: 04/01/2008

Reporter: Kerry Brewster

The new year has not brought good tidings for home owners across the country, with the National
Australia Bank lifting its variable home loan rate without any action by the Reserve Bank.

Transcript

HEATHER EWART, PRESENTER: The new year has not brought good tidings for home owners across the
country.

In an unprecedented move, a major bank has lifted its variable home loan rate without any action by
the Reserve Bank.

The decision by NAB is expected to be followed by the other big lenders in the coming weeks,
putting pressure on families already struggling to cope with Christmas debt and record prices at
the petrol pump.

Kerry Brewster reports.

KERRY BREWSTER, REPORTER: Happy new year from National Australia Bank.

(To Dennis Orrock) Ouch?

DENNIS ORROCK, MORTGAGE RESEARCHER: Absolutely ouch, yeah. It means we'll be asked to make
continual sacrifices, tighten the belts again.

KERRY BREWSTER: Australian banks have been feeling the effects of the global credit crunch, the so
called subprime lending crisis. NAB is just the first to pass some of those costs to its customers.
The new Treasurer, Wayne Swan, is not happy.

WAYNE SWAN, TREASURER: No, these are commercial decisions that the banks take, they are commercial
decision but I would urge all banks to be mindful of the impact on Australian families and
Australian business of these interest rate rises.

KERRY BREWSTER: Another rate rise, plus the spectre of pumped up petrol prices, up to $2 a litre,
means Australians face a double dose of financial pain.

CHRISTOPHER ZINN, AUSTRALIAN CONSUMERS ASSOCIATION: Now we're getting petrol going up, interest
rates, this double whammy. I think that it really is a reality check.

KERRY BREWSTER: The reality check arrived six months ago for Dianne Dabitt. Rising interest rates
forced her and her husband to sell their NSW Central Coast home at a $100,000 loss.

DIANNE DABITT, CAFE WORKER: It nearly killed our marriage. It nearly killed our marriage just
having that mortgage stress.

KERRY BREWSTER: Now they're each working seven days a week and living with the in-laws. Dianne
Dabitt's dream of owning their own home again today receded further.

DIANNE DABITT: We've got two alternatives, stay with my in laws or go and rent and can hopefully in
six months time we'll have enough to buy a house, providing the interest rates don't keep going up.

KERRY BREWSTER: National Australia Bank declined an interview with the 7:30 Report but in a
statement said:

"The cost of money has gone up, and ...when a customer comes to NAB for a home loan it costs the
bank more to purchase that money on the open market."

December's Christmas spending spree may seem wildly extravagant when the bills arrive.

DENNIS ORROCK: A lot of people won't be getting those Christmas bills, for example, until late
January, early February. And on top of that, they could be seeing their mortgage repayments
increase, we've already seen credit card payments moving out of the RBA cycles, business loan
repayments have increased, agribusiness loan repayments have increased. This liquidity crisis is
being felt across all borrowers.

KERRY BREWSTER: Mortgage researcher Dennis Orrock reckons the consumer crunch is not far off.

DENNIS ORROCK: People are going to be struggling to meet not only their mortgage repayments but
their car repayments, credit cards debt etc. International credit card debt's now over $40 billion
and that climbs every month. And that means that people will be at a point where they have to
either make serious adjustments to their life styles or have a serious look at their financial
situation.

KERRY BREWSTER: The dream of home ownership might still be alive but can we afford it?

Anglicare, a national network of welfare agencies, says it's already seeing plenty of Australians
doing it tough.

JOHN BLEWONSKI, ANGLICARE, VICTORIA: There are families already coming to us who cannot bear the
costs of children returning to schools. They're certainly not families who've had Christmas
holidays at the beach, they are families who are struggling. They're families who are having to
make their way in each day from the outer lying suburbs into town to work.

CHRISTOPHER ZINN: These are places where people have the highest mortgages as a proportion of their
income, but also, because of the lack of public transport, they're the ones who are using their
cars most in terms of commuting. So the people who are least able to afford increases are actually
the ones who are going to be faced with the greatest extra amounts to pay.

KERRY BREWSTER: Dennis Orrock says there are some positives to the story.

DENNIS ORROCK: If you want a job you can get a job in Australia and that's probably the most
important thing for people who have debt issues is if you're working you can work through your debt
issues. The issue with debt, when debt becomes extremely hard is when you don't have a job or an
income to support that debt.

KERRY BREWSTER: The Labor Government came to power knowing it would be dealing with an economy
under inflationary pressures.

WAYNE SWAN: When it comes to the inflation challenge, there's no doubt that the buck stops with the
Government but it's a long term challenge because inflationary pressures have been building for a
long period of time.

KERRY BREWSTER: This is probably not the start to the new year the Treasurer had in mind.

HEATHER EWART: Kerry Brewster with that report.