NAB points to term deposit offerings in rates defence

National Australia Bank has defended its decision to raise lending rates above the Reserve Bank's (RBA) official increase last month.

Speaking at the bank's annual general meeting, NAB chairman Michael Chaney said that the RBA position was only one factor affecting rates decisions, with overall higher funding costs also playing a big part.

He noted that such costs have partly been driven up by rising returns for customer savings which have encouraged Aussies to compare term deposits as the banks seek to attract retail funds.

"Of course many in the room here will be enjoying higher deposit rates that have occurred over the last year," said Mr Chaney.

Last month, NAB opted to lift its standard variable home loan rate by 43 basis points to 7.67 per cent following the RBA's 25-point hike. The move came as all of the "big four" banks chose to raise rates by more than the RBA increase.

NAB's defence of its actions also follows comments by treasury secretary Ken Henry, who this week pointed to higher funding costs at the banks, noting that the global financial crisis had served to increase the cost of wholesale lending and borrowing.

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