Macquarie Pushes Up Rates On Low-doc Loans

The Age

Friday March 14, 2008

By Jacob Saulwick and Danny John, Sydney

THE home loans arm of Macquarie Group has raised interest rates on some mortgages by almost three times as much as the latest official rise by the Reserve Bank, the biggest hit yet to home buyers as a result of the credit market meltdown.

And in another sign that the credit crunch has wiped out Macquarie from the home-lending business, the investment bank has started to redeploy staff within its mortgage division.

Macquarie will increase rates by 0.7 of a percentage point on its low-doc loans, offered to borrowers who don't have paperwork required for a standard variable mortgage, such as the self-employed.

Before the subprime crisis, Macquarie aggressively promoted its low-doc loans, offering some of the best rates available.

The increase doubles the maximum rate rise announced by the banks in response to the RBA's 0.25 percentage point rise last week, and is almost triple the official rate rise.

About 45,000 borrowers have taken out mortgages under Macquarie's brand, and the bank provides mortgages for another 50,000 people through a "white labelling" operation.

Last week Macquarie said it would "substantially" wind back its new lending business in response to the deterioration in credit markets. It said at the time that the decision would have no impact on existing customers.

The business model that Macquarie has used to fund mortgages securitisation, has been crippled by the subprime turmoil.

The costs to banks of borrowing from the international money market had risen dramatically and this will continue to put pressure on home loan rates.

© 2008 The Age

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