Australia’s four major banks, ANZ, Commonwealth Bank, NAB, and Westpac, have all declared their intentions to raise interest rates on mortgages. It is in alignment with the Reserve Bank’s recent increase. The Reserve Bank recently implemented a 0.25 percentage point hike. It brings the cash rate to 4.10 per cent, its highest level since April 2012. Following the RBA’s decision, Westpac was the first to announce the interest rate rise. NAB, Commonwealth Bank, and ANZ followed suit on Friday afternoon.
Commonwealth Bank of Australia (CBA) has stated that it will also increase interest rates on several saving products. The changes to variable rates for home loans announced by CBA will take effect on June 16, 2023. Similarly, ANZ has announced a 0.25 per cent per annum increase in variable interest rates for home loans. It includes residential investment loans, and line of credit home loans, effective from the same date. However, ANZ has not made any announcements regarding rate changes for savings accounts. Following suit, NAB has revealed that its standard variable home loan interest rate will also increase by 0.25 per cent starting from June 16.
NAB, besides its announcement regarding the increase in standard variable home loan interest rates, has also disclosed that it will raise the bonus interest rate for its Reward Saver and 12-month term deposit. Rachel Slade, NAB Group Executive for Personal Banking, emphasized the bank’s commitment to supporting customers during these challenging times. Recognizing the cumulative impact of successive rate increases since May the previous year on Australian households, NAB is proactively reaching out to customers to offer assistance and provide a range of options to navigate the rising cost of living.
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AMP Bank, another prominent lender, has announced its decision to pass on the full rate hike implemented by the Reserve Bank. It is anticipated that other lenders will follow suit in adjusting their interest rates accordingly.
Sally Tindall, the research director at RateCity.com.au, expressed her appreciation for the decision made by certain banks to apply the rate increase to savings accounts. Tindall specifically commended CBA for passing on the entire rate hike to all of its savings customers, considering it a fantastic move. She expressed hope that this action would create pressure on other major banks to review their savings rates and implement full rate hikes as well.
However, Tindall pointed out that at this point, neither Westpac nor ANZ have announced any rate increases for their savings customers, which she deemed unsatisfactory. She encouraged customers who are feeling the financial strain to get in touch with their respective banks.
According to the official statement released after the announcement, Dr Lowe stated that there might be a need for further monetary policy tightening. It will be to ensure the return of inflation to the target range within a reasonable timeframe. The Reserve Bank of Australia (RBA) has been progressively increasing rates since May 2022. It starts from a historically low level of 0.1 per cent, in an effort to curb inflationary pressures.
Conclusion
Recent data from the Australian Bureau of Statistics (ABS) revealed a significant rise in the annual inflation rate. It increased from 6.3 per cent to 6.8 per cent in April. However, the next quarterly data is not expected until next month. Despite these figures, inflation still surpasses the RBA’s target range of two to three per cent.
Dr Lowe emphasized that the rate hike implemented on Tuesday would instill greater confidence in the eventual return of inflation to the target range within a reasonable timeframe.
According to the statement, the current inflation level in Australia has surpassed its peak. But still remains high at 7 per cent. While acknowledging this decrease, the target range for inflation is yet to be reached. It will take some time before it is within the desired range. The board maintains a strong commitment to bring inflation back to the target level. They are prepared to take any necessary measures to achieve this goal.
