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NAB lifts interest rates, following Westpac and CBA -

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KIM LANDERS: Three of Australia's big four banks have now raised home loan interest rates.

The National Australia Bank has followed its competitors Westpac and the Commonwealth Bank, lifting its variable mortgage rate.

Property market analysts say the interest rate hikes could see auction clearance figures plummet over the weekend, as confidence takes a hit.

Will Ockenden reports.

WILL OCKENDEN: It's another rate rise from another major bank, and one that property market analysts say could hit hard at tomorrow's Super Saturday sales.

As was widely expected, the National Australia Bank has increased its variable home loan rates.

In justifying its decision, the bank put the move down to responding to "market conditions" and to regulatory changes.

JOHN SYMOND: Well we were expecting the banks to increase their rates, owing to their increased capital costs, it was always a matter of time.

WILL OCKENDEN: John Symond is the executive chairman and founder of financial services company Aussie Home Loans, which is partly owned by the Commonwealth Bank

JOHN SYMOND: Probably happened a little bit sooner than we thought, with Westpac, and then it was widely expected that all the banks and the lenders would follow suit to a certain degree.

WILL OCKENDEN: The National Australia Bank is the third of the big four banks to make the move, putting its variable rate home loans up by 0.17 of a per cent to 5.60 per cent per annum.

Like Westpac and the Commonwealth Bank before it, the NAB has used the excuse of increased capital costs.

NAB's decision, along with the CBA and Westpac, meant increase speculation on the Reserve Bank's next move.

JOHN SYMOND: Well I think they are positioning themselves, banks aren't good at playing Father Christmas, but certainly the Reserve Bank will be looking very, very closely at this. Confidence levels have remained fairly low, the Reserve Bank doesn't want to see confidence dented because of a perceived increase in home loan rates.

So had you asked me two weeks ago would the Reserve Bank drop official rates further, I would have thought not much chance; it may well have gone right through 2016 sitting where they are, but today, I'm tipping that the Reserve Bank will move down to equalise and offset the perceived interest rate increases by the banks to ensure that borrowers are not disadvantaged.

WILL OCKENDEN: There's been some criticism of the bank's decision to put their rates up and pass the costs of increased capital requirements onto customers.

Though the Treasurer Scott Morrison is staying out of the debate, saying any home loan interest rate increase is a commercial decision for the bank and consumers have a choice about who they bank with.

SCOTT MORRISON: They'll make decisions about what they're going to charge their customers, so that is entirely a matter for them to explain to their customers about why they would be doing this; there's no mandatory requirement on behalf of the Government to pass on costs to consumers, and at the end of the day, customers can choose where they want to bank and where they want to shop and where they want to buy their milk.

WILL OCKENDEN: Interest rates strategist at JP Morgan, Sally Auld, says the argument from the banks that they are just passing on the costs of tighter regulation is valid.

SALLY AULD: The regulator is saying to the banks "we want you to hold more capital", and that's a good thing over the medium term, because it makes the bank safer and stronger and more able, we hope, to withstand periods of stress.

I guess what we're seeing is the bank saying: "Well that's an additional cost for us, and we're going to pass on some of that cost to end borrowers."

WILL OCKENDEN: The rise from three major lenders comes ahead of the biggest day on Melbourne's property market calendar.

Tomorrow is the so-called Super Saturday, which will see around 1,500 properties go under the hammer.

ANDREW WILSON: Higher interest rates, they're not good news for the housing market generally.

WILL OCKENDEN: Dr Andrew Wilson is a senior economist at the Domain Group.

ANDREW WILSON: I think it's no coincidence that a sharp decline in auction clearance rates last Saturday in Sydney did reflect the raising of interest rates by Westpac. Certainly it did impact confidence, and I guess we'll see perhaps a similar result this weekend.

WILL OCKENDEN: He says the Melbourne market is facing its biggest test of the year tomorrow, and buyer sentiment may be hit by the rate rises.

ANDREW WILSON: We have a very big day of auctions in Melbourne this weekend; this will be the biggest day of the year for auction activity in Melbourne, and I guess that sellers would be trepidatious, given the impact on the Sydney market last weekend with the announcement of higher rates, sellers would be mindful that this might have an impact on buyer sentiment this weekend on the Melbourne Super Saturday.

KIM LANDERS: Dr Andrew Wilson from the Domain Group ending Will Ockenden's report.