Saturday, February 11, 2012

How much more? Westpac sticks it to its customers, sticks it to Swan


With ANZ / With Westpac


$20,000: $0.78 $1.30
$40,000: $1.55 $2.59
$60,000: $2.33 $3.88
$80,000: $3.10 $5.16
$100,000: $3.88 $6.48
$200,000: $7.76 $12.96
$300,000: $11.64 $19.44
$400,000: $15.52 $25.92
$500,000: $19.40 $32.40
$600,000: $23.28 $38.88
$700,000: $27.16 $45.38
$800,000: $31.04 $51.62
$900,000: $34.92 $58.32
$1,000,000: $38.80 $64.80

Standard variable rate, 25 year mortgage


Westpac 7.46% (from 7.36%)
ANZ 7.36% (from 7.30%)
Bank of Queensland 7.36%
Commonwealth 7.31%
National Australia Bank 7.22%
ME Bank 6.74% (members only)

ANZ and Westpac have warned they could again raise mortgage rates without a signal from the Reserve Bank because of continued uncertainty in global money markets.

The two giants yesterday increased mortgage rates - blaming the need to protect profit margins - triggering an immediate backlash from politicians and customers.

ANZ lifted its mortgage rates by 6 basis points, taking its standard variable mortgage rate to 7.36 per cent.

Westpac followed with a more aggressive increase, raising its variable rate by 10 basis points to 7.46 per cent. This gives it the highest borrowing charge among the major banks.

Other banks - both big and small - are expected to push through their own rate rises in coming weeks.

The move comes just days after the Reserve Bank surprised the banking sectors by opting to leave the official cash rates on hold. Major banks had been planning to pass on only some of the anticipated Reserve Bank cuts.

An angry Treasurer Wayne Swan linked yesterday's rate rises to decisions by banks, including Westpac, to cut staff. From time to time, he said, banks "decide they want to give priority to their shareholders over their customers and over their staff".

"We don't dictate what they do with their pricing or what they do with their staffing, but what we can do is put in place a framework that empowers their customers to move down the road and get a better deal," he said.

The ANZ move is expected to add $12 a month to repayments on a $300,000 mortgage, while the Westpac move adds $20. It is understood both banks briefed the Treasurer before going public with their decisions...

Last night, Commonwealth Bank, the nation's biggest mortgage lender, had not changed its rates, although a spokesman said ''rates are regularly reviewed''.

National Australia Bank said it had not changed its mortgage rates. A spokeswoman said it was committed to having the lowest rate of the big banks.

The Commonwealth is charging 7.31 per cent for its variable mortgage while National Australia Bank is discounting at 7.22 per cent.

ANZ's Australian head, Phil Chronican, last night told The Saturday Age he faced a "serious dilemma" in becoming the first bank in four years to increase rates without guidance from the Reserve Bank.

However, he cautioned if funding costs did not subside this could again force his bank's hand.

''We don't know where the cycle is going to go while funding costs continue to bounce around.
''It would be wrong to say this (move) puts an end to anything,'' he said.

Westpac group's Peter Hanlon strongly rejected suggestions the bank was gouging customers.

''What we're doing here is reflecting the costs of funding,'' Mr Hanlon said.

''We want to make sure the bank remains strong, we want to make sure we continue to lend and what we've seen with banks overseas when they run into problems they have to be bailed out by governments,'' he added.

Coalition Treasury spokesman Joe Hockey rubbished the suggestion that customers could take their business elsewhere, saying "it's not going to do any good walking away if down the road one of the other major banks increases their rates".

"This shows the Treasurer is weak. He's been out there this week talking about how hugely profitable the banks are, how they should pass on any interest rate cut in full.

''And now at the end of the week we've got a rise and he simply shrugs his shoulders."

Greens MP Adam Bandt called on Mr Swan to get behind his bill that would require banks to provide so-called tracker mortgages that rise and fall with the cash rate.

'The time for tough talking ? is at an end," he said. ''Wayne Swan should not let ANZ get away with it.''

A Reserve Bank statement released yesterday said that in January banks were paying an unusual 2.50 percentage points above the government bond rate to raise money overseas. But it said in recent weeks the cost had come back 0.30 points.

Most lending rates were close to their medium-term averages. A benign inflation outlook gave the Reserve "scope" to cut official rates should economic conditions weaken materially.

The Reserve knocked its forecast for economic growth in the year to June from 4 to 3.5 per cent on the basis of lower International Monetary Fund forecasts for global growth. It expects growth to slip further later in the year before climbing back towards 3.5 per cent late in 2013.

With smaller banks and credit unions also feeling the pinch on funding, the major banks were again flexing their pricing muscle, CLSA banking analyst Brian Johnson said.

This ''suggests that in the near term, higher bank funding costs will be passed on to borrowers,'' he said.

Published in today's Sydney Morning Herald and Age

Oh my. Remember this?

Related Posts

. Why the ANZ moved

. ANZ: “The only major bank whose margins shrank in the second half of 2011”

. Bank by bank by bank by bank. How Swan won. (back then)