The Greater Building Society has been left with no choice but to follow the other major Australian banks and building societies in increasing its home loan interest rates, chief executive John Arnold said today.

Mr Arnold said that from today the Greater's standard variable home loan interest rate would rise 0.15 percent to 8.35 percent. This rate is still lower than the rate offered by all of the Greater's significant competitors.

Mr Arnold said that although the Greater was not directly linked to the US sub prime mortgage crisis, the situation in the US had increased the cost of sourcing funds across the globe.

“We have absorbed the increased cost of lending for the benefit of our members for as long as we could,” he said.

“As the money market has not returned to more normal margins, the Greater, like other lenders, has had to pass on some of that increased cost.”

Mr Arnold said that he hoped deferring the rate increase until now had provided some relief to Greater customers over the Christmas period.

The 0.15 percent increase is not as large as the 0.25 percent reduction in rates that the Greater gave to new and existing home loan customers in April last year. That cut in interest rates was a benefit to members, independent of any official move in interest rates.

“While we have had to pass on some increased cost to our members this time, one of the benefits of banking with a mutual like the Greater is that it gives back to its members when times are good.”