Australia’s Big Four Banks Raise Interest Rates

Post by Sharat on October 9, 2009 · Under Australian Economy, Business News, Company News, banking, credit cards, home loans, interest rates, mortgages · Comment

Australia’s Big Four banking groups, who combined, control 85 per cent of the Australian mortgage lending market, all raised their interest rates on Thursday, matching the 25 basis point rate hike initiated by the Reserve Bank of Australia.

The Big Four also raised their deposit rates by 25 basis points, with ANZ being the first lender amongst them to increase its interest rates.

ANZ raised its deposit rate by 50 basis points, highlighting the intense competition that exists in the banking sector for access to Australian savings, a strong and stable source of funding.

On Tuesday the Reserve Bank of Australia raised the official cash rate by 25 basis points to 3.25 per cent, the first such increase in official interest rates since March 2008.

ANZ’s new rates will be effective from Monday 12th of October. The Melbourne based lender has increased its standard variable mortgage rate to 6.06 per cent from 5.81 per cent.

ANZ also raised its short term fixed mortgage rate, whilst cutting the cost of its 10 year fixed rate mortgages.

Whilst raising interest rates on deposit accounts by up to 50 basis points, ANZ said credit card rates and business loans were still under review.

CBA, NAB and Westpac all said they would follow suit immediately after ANZ’s Thursday’s announcement.

NAB said it would from Monday, increase its standard variable rate to 5.99 per cent, maintaining its position as the lowest amongst all the majors, along with CBA.

“We take a number of factors into consideration when determining interest rates and the cash rate is one of those. We also consider money market conditions, term funding costs, the cost of raising deposits and the competitive market. Overall, the average cost of funding a home loan continues to rise.” NAB group executive personal banking Lisa Gray said.

NAB intends to raise its deposit and variable business lending rates by 25 basis points.

Australia’s largest mortgage lender CBA, also said it would raise its standard variable to rate to 5.99 per cent and its deposit rate by 25 basis points effective Tuesday October 13th. The Sydney based lender re-iterated the point that funding costs continue to remain high.

“The bank’s wholesale funding costs remain high and continue to increase as previous long-term funding matures and is replaced with new funding at a significantly higher cost,” retail banking services group executive Ross McEwan said.

Australia’s second largest mortgage lender Westpac, matching ANZ’s move, said it too would raise its standard variable rate to 6.06 per cent effective Monday, whilst raising credit card rates and variable business loan rates by 25 basis points.

The lender also plans on raising interest rates on personal and business deposit accounts by 25 basis points.

“The RBA’s decision is a clear signal of its confidence in the recovery of the Australian economy. Personal and business online deposit accounts will benefit from a full 0.25 percentage point increase with Westpac’s deposit rates now at their highest levels above the official RBA cash rate in recent memory, reflecting the intense competition among Australia’s major banks for household savings,” Westpac retail and business banking executive Peter Hanlon said in a statement.

Between them the Big Four banking groups control over 86 per cent of the Australian mortgage lending market.

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