Wednesday, March 03, 2010

Westpac, the Commonwealth and the ANZ treat us gently, for now


Westpac 6.76% to 7.01%
St George 6.68% to 6.93%
ANZ Bank 6.66% to 6.91%
Commonwealth 6.61% to 6.86%
National Australia 6.49% to 6.74%

Mortgage holders can breathe a guarded sigh of relief after the first official rate hike of the year. Each of the lenders that has responded has passed on no more than the Reserve Bank's 0.25 point increase.

But each has also complained about "cost pressures" and hinted it will not be able to continue to hold the line.

The Commonwealth Bank which imposed an outsized 0.37 point increase when the Reserve last hiked rates in December this time pushed up rates only 0.25 per cent but warned it "continues to experience increases in wholesale funding costs." The ANZ which last time pushed up rates 0.35 points fell in line with the Reserve Bank but warned it was "continuing to absorb additional funding costs" in order to balance "very real commercial pressures with the interests of our customers and the broader community’s interest in the economic recovery".

St George, owned by Westpac which in December led the pack with a 0.45 point increase said it would only push up rates 0.25 points this time in order to take "a responsible approach to managing interest rates and funding cost pressures."

When asked late yesterday why Westpac itself hadn't announced a move, a spokesman said "multi-brand strategy mate... our costs are under review."

Even the National Australia Bank - the only bank that last time held its increase to 0.25 points - said this time it would need to examine the "cost of providing funds" before making a decision.

Within minutes of the Reserve Bank's announcement Treasurer Wayne Swan sent a message to the banks that there was "absolutely no justification whatsoever for any increase over and above the official cash rate increase".

"If we look at the net interest margins for the major banks, they have improved to pre-crisis levels," he told a parliament house press conference. "I have made my views very clear about what Westpac did last time - it was not justified and they thoroughly deserved the backlash that they subsequently suffered."

Westpac removed its head of retail and cleansed its website after it posted a video justifying the 0.40 point hike by comparing its mortgage rate to the price of bananas.

The latest increases make ANZ the most expensive with a standard variable mortgage rate of 6.91 per cent and would make NAB the cheapest with a rate of just 6.74 per cent if it does no more than pass on the official increase. If Westpac passes on the increase in full it'll lead the pack with a standard variable rate of 7.01, becoming the first bank to push its mortgage rate above 7 per cent.

Treasurer Swan said rates were still at "1970s lows".

"I think families and businesses understand that rates can't stay at emergency levels forever, although for someone with a mortgage it's tough stumping up an extra $50 a month. The fact is that the Reserve has flagged for some time that rates will be adjusted as the economy recovers, and the economy is recovering."

In a statement released after the meeting Governor Glenn Stevens described the hike as "a further step" in the process of returning rates toward average levels now that economic growth was likely "close to trend".

He has previously said he expects two to four such hikes this year.

The increase will add around $47 to the monthly cost of servicing a $300,000 mortgage, and $63 to the cost of cost oservicing a $400,000 mortgage. It will bring the total increases since the hikes began in October to $139 and $186.

Retail trade figures released as the board met built the case for the hike, showing seasonally adjusted sales grew 1.2 per cent in January after slipping 0.9 per cent in December.

Published in today's SMH  and Age 

UPDATE: Westpac has now moved. Up a further 0.25 points to 7.01
UPDATE: NAB's done it too. 6.49 to 6.74

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