Tuesday, July 15, 2008

Westpac completes the banks' heist

All in all, a successful operation.

The new mortgage rate scorecard: St George: 9.67%; ANZ and Commonwealth: 9.62%; Westpac and NAB 9.61%.

Note that most rates actually charged are discounted by 0.6 percentage points from these "standard" rates - for the moment.

Here's today's announcement from Westpac:

Westpac Banking Corporation today announced an increase of 0.14% to its standard variable home lending rates to 9.61% effective Thursday 17 July 2008.

“Volatility in global funding markets continues to impact Westpac’s average cost offunds,” Westpac Group Executive, Consumer Financial Services, Peter Clare said.

“While passing on some of the additional costs to customers, we are continuing to absorb a significant portion of the additional longer-term funding costs that we have experienced since the market volatility began almost 12 months ago.

“We continue to be very thoughtful in our approach of balancing the needs of our customers with the needs of our shareholders.”

There's nothing to say that they won't push up rates again. But, the Reserve Bank is not likely to judging from the words of its Board Minutes released today and quoted below the fold.

"Members concurred that the evidence becoming available in the latest month had added weight to the view that the current stance of policy, in conjunction with the more general tightening in financial conditions that had occurred since the middle of last year and most recently the additional rise in fuel costs, were working to restrain demand.

Consumer spending had slowed significantly and there had been a marked decline in the growth of credit to both households and businesses. Surveys indicated that confidence had fallen further over the past month and asset prices were weakening. In addition, there were some early signs of softening in labour market conditions. The deterioration in conditions in financial markets over the past month had probably tightened financial conditions a little further.

On the other hand, members expected that the CPI for the June quarter, which would be released before the next Board meeting, would show another high reading. These high outcomes risked lifting inflationary expectations and/or wage demands. If that occurred, it would make inflation more difficult to reduce over time.

Members were also conscious that the rise in the terms of trade that was taking place would add substantially to national income and that this could translate into renewed growth in spending. This meant that there remained considerable uncertainty about the outlook for demand and inflation.

On balance, while members remained concerned about the current rate of inflation and the uncertainties about the outlook, the increasing signs that demand was slowing suggested that the existing policy setting was exerting the appropriate degree of restraint. Provided demand continued to evolve as expected, inflation was likely to decline over time.

Weighing up the various factors, the Board judged that the current stance of monetary policy remained appropriate and would continue to evaluate prospects for economic activity and inflation in the light of new information.

The Board decided to leave the cash rate unchanged at 7.25 per cent."