Australia’s Major Banks Respond Swiftly To RBA Rate Hike
Australia’s Big Four lenders all quickly raised their mortgage lending rates in response to the Reserve Bank of Australia’s decision to tighten official interest rates yet again.
Despite tightening interest rates for the sixth time in eight months, RBA governor Glenn Stevens did hint that the central bank would pause on interest rates for some time to come.
The official cash rate was increased by 25 basis points on Tuesday and now stands at 4.5 per cent. Shortly after the central bank made its announcement CBA was the first to respond with a 25 basis point increase in its standard variable rate mortgage, which now will be effective from May 7th .
Later in the day rival Westpac followed suit with an increase of its own, raising its standard variable home loan rate also in line with the central bank, by 25 basis points to 7.51 per cent.
NAB joined its rivals, also raising variable mortgage rates by 25 basis points to 7.24 per cent, which is the lowest variable mortgage rate amongst the Big Four.
ANZ enacted its own 25 basis point rate hike, lifting its standard variable rate on home loans by 25 basis point to 7.41 per cent.
RBA Governor Glenn Stevens in his statement announcing the rate hike said he now expects inflation to hit the upper half of the central bank’s 2-3 per cent inflation target, and acknowledged for the first time in many months, that inflation could re-emerge as a problem confronting the Australian economy.
“Recent data on inflation confirms that it has declined from its peak in 2008, helped by a noticeable slowing in private sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand. The extent of the decline from here may not be quite as much as earlier forecast and inflation now appears likely to be in the upper half of the target zone over the coming year.” Mr. Stevens said.
“With the risk of serious economic contraction having passed some time ago, the board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more. The board expects that, as a result of today’s decision, rates for most borrowers will be around average levels. This represents a significant adjustment from the very expansionary settings reached a year ago.” Mr. Stevens added.
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