Bank of Queensland is raising its home loan interest rates on the same day it's unveiled a lift in profit, blaming increasing costs for the rate hike.
Chief executive Jon Sutton defended the surprise mortgage rate rise, saying the increase is needed to balance growth, risk and margins over the longer term.
"These decisions are not made lightly, and we thought long and hard about where our position is," he said.
"We are seeing a significant increase in wholesale funding markets ... We've also seen a significant increase in hedging costs."
BOQ had always been competitive in the banking industry, and would remain so, Mr Sutton said.
BOQ's variable interest rates will rise by 12 basis points for owner-occupied home loans and by 25 basis points for investor loans from April 15.
The bank's Clear Path variable rate home loan will rise to 4.72 per cent a year for owner-occupiers and to 5.14 per cent for investors. The standard variable rate will rise to 5.86 per cent annually for owner-occupiers and 6.28 per cent for investors.
The move comes just two days after the Reserve Bank of Australia left its benchmark interest rate unchanged at a record low of two per cent.
BOQ's loan impairment expense was flat at $36 million in the six months ending February 29, compared to the same period a year ago, and down on fiscal 2015 second half's $38 million.
The bank's half year cash profit rose seven per cent to $179 million, driven mainly by strong customer demand for mortgages.
It's net interest margin - a measure of profitability of its loans - was maintained at 1.97 per cent, while costs rose almost four per cent.
Mr Sutton attributed the interim results to housing lending growth and strong asset quality levels.
The bank's shares dropped 14 cents, or 1.2 per cent, to $11.45.
BANK OF QUEENSLAND PROFIT UP
* Half year net profit up 11pct to $171m
* Cash profit up 7pct to $179m
* Revenue up 4pct to $561m
* Interim dividend up two cents to 38 cents
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