Commonwealth Bank and ANZ have followed their rivals in lifting its variable mortgage rates, pleading increased funding costs.
The Commonwealth, Australia's largest lender, said on Thursday that variable rates for owner-occupiers and investors would increase by 0.15 percentage points from 4 October.
ANZ will hike rates by 0.16 percentage points andwould take effect from 27 September 27. Drought-declared parts of regional Australia would be spared the increase, it said, a move that will protect about 70,000 borrowers.
Westpac was the first major lender to move in the latest round of hikes with a 014 percentage point rise. The moves come despite the Reserve Bank this week once more holding the cash rate at a record low 1.5 per cent. National Australia Bank is the only major lender not to increase its rates.
The decision by the banks will further increase the pressure on household budgets already constrained by weak wage growth.
Despite Wednesday’s unexpectedly strong growth figures, many economists believe Australia is facing significant headwinds such as falling house prices and a mounting crisis in emerging markets and currencies as a result of the US-China standoff.
One of the most important shifts in the global economy in the past 12 months has been an increase in interest rates in the United States, which is in turn pushing up the cost of borrowing around the world. Australian banks borrow heavily on international credit markets in order to fund their lending at home and say that the extra costs are eating away at their profit margins.
Angus Sullivan, group executive retail banking services at Commonwealth Bank, said: “We have made this decision after careful consideration. We are very conscious of the impact that increasing interest rates will have on our customers, however it is important that we price our home loan products in a way that reflects underlying costs.”
Following a sustained increase in funding costs @CommBank will increase variable home loan rates for owner occupied & property investment loans by 15 basis points or 0.15% per annum effective 4 October. https://t.co/WQCrtrFUKz pic.twitter.com/Ntfc1M7G2e
— CBA Newsroom (@CBAnewsroom) September 6, 2018
He said borrowing costs had been driven up in the past six months, mainly by a rise in an interbank rate known as the 90-day bank bill swap rate.
“We have absorbed these higher funding costs over the past six months in the hope that they would ease. Unfortunately, the costs have remained high and it is now expected that they will remain elevated for the foreseeable future.”
ANZ's Australian group executive Fred Ohlsson said the rate rise was a difficult decision and understood the impact it would have on family budgets.
But he added: “The reality is it is more expensive for us to fund our home loans on wholesale markets and we also needed to balance the needs of all stakeholders.”
