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Major Australian Banks Follow RBA Lead In Raising Interest Rates
ANZ has back tracked on a statement by chief executive Mike Smith, that it would be reluctant to change variable interest rates out of synch with the central bank, and warned that it may lift variable mortgage rates outside of RBA monetary rate setting policy.
The Melbourne based lender joined the three other major banks in lifting their rates by 25 basis points on Tuesday, in line with the 25 basis point hike in the official cash rate.
In an unusual move however, Westpac said it would insulate small businesses from the increase in interest rates.
Last month, ANZ chief Mike Smith made headlines by suggesting he would be “reluctant” to increase variable mortgage rates out of step with RBA adjustments.
Mr. Smith later clarified the comment by saying his reluctance did not represent a firm commitment to not set its interest rates outside of RBA policy, and that ANZ would respond, should rivals lenders choose to set rates out of synch with the central bank.
Graham Hodges, ANZ’s deputy chief executive said on Tuesday that the lenders mortgage margins faced pressure from rising average funding costs.
“If sustained over time, there will be commercial pressure to pass the additional costs on. Right now, it’s in everyone’s interest that the recovery consolidates and the right thing to do at this point in the economic cycle is for us to absorb the additional funding costs and pass on only the amount of today’s official increase to our mortgage and small-business customers.” Mr. Hodges said.
The Big Four all followed the central bank’s lead by raising rates by 25 basis points. CBA and NAB currently have the lowest variable mortgage lending rate at 6.24 per cent, whilst Westpac and ANZ have marginally higher variable rates at 6.31 per cent.
Westpac made an exception for small businesses and said it would not lift interest rates on variable rate loans extended to small business customers.
Australian banks face strong political pressure whilst sovereign deposit and funding guarantees remain in place, to minimise rate rises in order to help with economic recovery.
Most banks also lifted their deposit rates on Tuesday, as intense competition for deposits remains, fuelled by smaller regional lenders disadvantage in wholesale debt markets.
Westpac group executive for retail and business banking, Peter Hanlon, said deposit rates were at their highest level above the cash rate “in recent memory”.
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