ANZ Angers Politicians By Raising Interest Rates By 39 Basis Points
Australian banking major ANZ has added to the intense political fire-storm surrounding the banking industry by increasing its standard variable mortgage lending rate by 39 basis points, 14 basis points higher than the official rise in interest rates.
ANZ in an attempt to soften the blow of its rate hike included a number of sweeteners such as abolishing exit fees and discounting switching costs.
Finance minister Penny Wong in condemning the rate hike said that the move would be met by intense public hostility.
Prime Minister Julia Gillard added her voice to the growing criticism by saying that Australian lenders had no excuse for lifting their interest rates above that of the official rate.
Joe Hockey, Treasury spokesperson for the opposition said ANZ “made a mockery of the Gillard government and had kicked sand in the face of Wayne Swan.”
ANZ’s 39 basis point rate hike takes its standard variable rate mortgage to 7.8 per cent and adds another $77 a month in repayments to a $300,000 loan which has a 25 year tenure.
ANZ’s decision follows that of CBA’s move last week to lift its lending rates by 45 basis points. The decision by CBA sparked a political fire-storm which has resulted in ASIC saying the banking industry will come under intense scrutiny and an all out assault on the sector by Mr. Hockey.
ANZ chief executive of Australian operations Philip Chronican said “intense competition for deposits and high wholesale funding costs” had increased the bank’s cost of lending.
“Politicians have their own issues that they are trying to deal with it; we didn’t want to engage in a political debate,” he said.
“I think the issue got out of control in the last week or so and I think we need to bring it back down to a substantive level. We hope it passes and we can have a genuine dialogue with Canberra.”
ANZ sought to soften the blow by introducing a raft of measures designed to placate politicians and consumers. ANZ says it will abolish mortgage exit fees, it will also offer a 44 basis point discount on three year mortgage rates until the end of the year, and will also offer as much as $1,600 in fee discounts, which will have the effect of lowering switching costs for loans.
Prime Minister Gillard speaking whilst attending the G20 summit in Seoul Korea described ANZ’s decision as arrogant and added that it would anger the Australian people. The Prime Minister issued a stark warning to Australian lenders not to doubt the government’s resolve to raise the level of competition within the banking industry.
Penny Wong said that ANZ’s decision showed that the lender had failed to learn from the lessons of the last week and that it would face the same kind of hostility from the Australian people as CBA.
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