National Bank of Australia Ltd (NAB) has raised its variable mortgage rate by the same amount as the central bank, as it attempts to lure customers away from rivals and particularly Westpac Banking Corporation.

NAB said in a statement on Thursday that it would increase its standard variable home loan rate by 25 basis points, to 6.49 per cent, effective from Friday December 4.

By constrast, Westpac on Tuesday raised its variable home loan rate by 45 basis points to 6.76 per cent, effective from Friday December 4. The increase was almost double the increase in the cash rate announced earlier that day by the Reserve Bank of Australia (RBA).

The RBA increased the cash rate by 25 basis points to 3.75 per cent, its first ever third consecutive monthly increase since it began announcing rate increases in 1990.

“Today we are sending a message to customers at Westpac and the other banks that NAB can offer them a better deal,” group executive for personal banking Lisa Gray said in the statement.

NAB said its customers would be about $51 a month better off than those with Westpac, based on the average $300,000 home loan.

Commonwealth Bank of Australia Ltd and ANZ Banking Group Ltd have yet to declare their hands on their new lending rates.

Westpac blamed the higher than expected rate increase on the greater cost of securing funds through offshore wholesale funding markets and local deposits.

Ms Gray said that while NAB had faced the same pressures, it was more important in the long run to improve the bank’s reputation and relationships with customers.

“We have been very considered with this announcement, given funding costs and the cost of raising deposits continue to fluctuate and are expected to increase further,” she said.

“However, we believe that improving our reputation and relationships with our customers and the community is core to the long-term sustainability and success of our business.”

NAB included a slide pack with its interest rate announcement that explained how the cost of deposits and long and short-term wholesale funding had increased since the global financial crisis.

The cost of both long-term wholesale funding and deposits, which fund up to 80 per cent of the bank’s lending, are likely to keep rising in 2010, according to Melbourne-based NAB.

NAB also said it would also increase the interest rates on a range of consumer deposits on Friday.

The bank will increase deposit rates and business variable loans by 25 basis points on Monday, December 7.

Federal Treasurer Wayne Swan said NAB did the “right thing” by its customers and it was encouraging to see the competitive pressure on the other banks.

“I think the community generally will be looking to the other banks to follow this positive example set by NAB,” Mr Swan said.

“The contrast with the behaviour of Westpac earlier this week could not be more stark.”

Shares in NAB declined 12 cents, or 0.42 per cent, to close at $28.68, while Westpac added 19 cents, or 0.78 per cent, to $24.46.

AAP