Westpac follows ANZ despite Swan warning

10 Feb 2012, 6:59 pm   -   Source: AAP

This video has expired

We're sorry but this video has expired. You may find another one to watch on the right or click here to return to the video page.

Share This

Westpac has announced it will raise its standard variable home loan rate by 0.1 of a percentage point to 7.46 per cent.

RELATED

Two of Australia's biggest banks have ignored Treasurer Wayne Swan and the Reserve Bank of Australia's lead by independently lifting their variable lending rates in the same week the RBA kept monetary policy steady.

ANZ increased its rates by 0.06 per cent at its monthly review on Friday.

A couple of hours later - at 6.05pm (AEDT) - Westpac followed suit, lifting its standard variable mortgage rate by 0.10 per cent to 7.46 per cent. Before the Westpac announcement, an angry Treasurer had laid into the ANZ bank, saying there was no need for the ANZ or any other of the big banks to increase rates.

"I think ANZ customers will be absolutely ropeable with the ANZ," Mr Swan told reporters in Sydney.

"The fact is that the major banks in this country are very profitable. Their net interest margins are back to where they were prior to the global financial crisis."

Mr Swan said these sentiments applied to all the major banks should they, too, be considering lifting their rates, and urged mortgage holders to shop around.

ANZ chief executive for Australia Philip Chronican said his bank had a "serious dilemma" in balancing the rising cost of bank funding and the expectation of borrowers that it keep lending rates as low as possible.

"While we recognise our decision may leave some people frustrated and even angry, we believe Australia needs safe, well-run commercial banks that aren't a burden on taxpayers and that can continue to lend," he said in a statement.

"The alternative of weak, constrained banks that we see in the United States and in Europe is a recipe for stagnation and recession in Australia." Westpac head of retail banking Jason Yetton said its decision wasn't an easy one and also cited rising funding costs as the reason.

Opposition treasury spokesman Joe Hockey said Mr Swan was an "insipidly weak" treasurer, who talked tough but continued to be ignored by the banks.

"If they have funding problems, the treasurer should be across the issue but clearly he is not across his brief," Mr Hockey told reporters in Sydney.

Greens MP Adam Bandt said the decision was a serious challenge to monetary policy at a time when the national economy was facing serious challenges from a deteriorating global economy.

"Wayne Swan should not let ANZ get away with it," he said in a statement.

ANZ's 0.06 per cent increase to its standard variable mortgage to 7.36 per cent will add $6.50 a fortnight to the average home loan of $280,000, while adding $3 fortnightly on the average $130,000 business loan.

For a Westpac customer with a $250,000 mortgage, payments will rise $16 a month.

The ANZ and Westpac rate changes came as the Reserve on Friday fleshed out its decision to leave monetary policy on hold at its board meeting earlier this week, defying financial market expectation of a further 25-basis point cut, following reductions in November and December.

In its quarterly statement on monetary policy, the central bank trimmed both its economic growth and inflation forecasts with the possibility of a sharp slowing in Europe remaining the main downside risk to the Australian economy.

It cut its growth forecast for the year ending in June 2012 to 3.5 per cent from the 4.0 per cent it had previously predicted in November.

Underlying inflation for the same period is now seen at 2.25 per cent from 2.5 per cent previously, and in the bottom half of the central bank's two to three per cent target.

The Reserve reiterated that the current level of the cash rate at 4.25 per cent was "appropriate, for the moment".

"The current inflation outlook would, however, provide scope for easier monetary policy should demand conditions weaken materially," it said. "Over the months ahead, the board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation."

  • Follow us: 
  • Follow us on Facebook
  • Follow us on Twitter
  • Follow us on Youtube