NEWS - Financial Services
Published 11:30 AM, 8 Oct 2009
Last update 4:53 PM, 8 Oct 2009
Big four lift home loan rates by 25bps
By a staff reporter
Australia's big four banks have moved to pass on the Reserve Bank's 25-basis-point increase in the cash rate, with Westpac Banking Corp Ltd, ANZ Banking Group Ltd, Commonwealth Bank of Australia Ltd and Westpac Banking Group Ltd boosting rates by an equivalent amount throughout the day.
ANZ Banking Group moved first, announcing it will lift its variable rate mortgage products by 25 basis points, with National Australia Bank following on a range of home lending products.
Commonwealth Banking Group announced its move in the afternoon, saying the 0.25 per cent rise reflected recent increases in market interest rates and wholesale funding costs.
Westpac followed suit, saying its variable home loan would lift 25 basis points to 6.06 per cent annum, and variable business lending rates would also rise by 0.25 per cent.
Shares in all four majors rose strongly during the day's session, with NAB posting the biggest gain of 4.43 per cent to $31.35 against a 1.55 per cent rise in the benchmark index.
ANZ rose by 3.73 per cent to $24.74, Commonwealth Bank of Australia climbed 3.25 per cent to $52.99 and Westpac lifted 3.09 per cent to $26.30.
ANZ first off the rank
Melbourne-based bank ANZ said its 0.25 per cent rate rise would affect new and existing customers.
"The new rate on the standard variable rate home loan will now be 6.06 per cent, which is equivalent to a 6.16 per cent per annum comparison rate," ANZ said in a statement.
The comparison rate is calculated on a loan amount of $150,000 over a term of 25 years based on monthly repayments.
ANZ said for new customers, fixed-rate mortgages would increase by 0.25 per cent per annum for one- and two-year terms to 5.70 per cent per annum and 6.69 per cent per annum respectively; by 0.1 per cent per annum to 7.09 per cent per annum for three-year terms and by 0.2 per cent to 7.69 per cent per annum for four-year terms.
The 10-year term rate will be reduced by 0.25 per cent to 8.94, the Melbourne-based bank said.
ANZ also said interest rates for credit cards and small business were under review.
NAB follows suit
NAB's new standard variable rate and consumer deposit rates will come into effect on October 12, rising to 5.99 per cent from 5.74 per cent.
The bank also said it will increase rates by 0.25 per cent on a range of variable business lending and business deposit rates.
NAB Personal Banking group executive, Lisa Gray, said that the lender 's decision to hike the rates was based on the centra bank's rates decision, but the bank also took into account current market conditions, term funding costs and the cost of raising deposits when setting rates.
"Overall, the average cost of funding a home loan continues to rise," Ms Gray said.
“Our current variable interest rates remain highly competitive and even once our new rates come into effect, they still remain at historically low levels."
NAB said that nine out of 10 of its home loan customers were on a discounted package and that the majority were ahead in their repayments.
CBA says wholesale funding costs remain high
CBA, Australia's largest home lender, said the bank’s wholesale funding costs remained high and continue to increase as previous long-term funding matures and is replaced with new funding at a significantly higher cost.
Group executive, retail banking services, Ross McEwan said while improving improving market conditions had prompted the increase, the majority of CBA variable rate home loan borrowers were already making repayments at levels above the new minimum requirement.
The new variable home loan interest rates would be effective from October 13, the bank said.
RBA rate rise sign of economic confidence: Westpac
In a statement, Westpac said the RBA rate rise was a clear signal of the central bank's confidence in the recovery of the Australian economy.
"However, Westpac recognises the impact of this decision on household budgets and will ensure our customers are well-supported," group executive retail and business banking, Peter Hanlon, said.
The 25-basis-point rise would see repayments on the average $250,000 household mortgage increase by about $40 a month, the Sydney-based bank said.
Trigger from RBA
On Tuesday, the Reserve Bank of Australia's (RBA) surprised many by increasing the overnight cash rate by 25 basis points to 3.25 per cent.
The move - the first monetary policy tightening policy since March 2008, had prompted speculation about which of the big four banks would be the first to follow suit.
Federal Treasurer Wayne Swan said after the central bank's rate hike that he did not want see banks raise variable mortgage rates by more than 25 basis points, acknowledging some had not fully implemented previous reductions by the RBA.
It had been reported the ANZ, CBA, NAB and Westpac were cautious about lifting rates give the level of political support they had received from the federal government during the global financial crisis (GFC) in the form of government guarantees on wholesale funding and retail deposits, and a short-selling ban on financial stocks.
The big four have increased their percentage of the Australian home loan market to around 90 per cent from 60 per cent during the GFC.
Related Industry Sectors
Related People
Related Companies