 Will banks lift mortgage rates?
All major banks say they are reviewing their mortgage interest rates after the Reserve Bank of Australia shocked the financial markets yesterday and raised the official rate by 25 basis points.
The official interest rate now sits at 3.25 per cent and has many wondering how soon the banks will start raising variable home loan rates.
The Commonwealth Bank, National Australia Bank, ANZ and Westpac have all said their rates are now under review. Recently, lenders started raising their fixed rates in preparation for the RBA rate rises.
Most economists were predicting that the Reserve Bank would move soon to raise the official rate from it's 49-year low, where it has sat since April, however, predictions were leaning more towards November. Yesterday's rate rise shocked many, but not all.
Earlier this week better than expected jobs data was released which led to some economists changing their predictions and saying the chances of a rate rise in October more likely.
All eyes now turn to the Big Four banks to see who will move first to raise standard variable rates and bow much they will rise by.
CBA chief executive Sir Ralph Norris already spoke out last week saying he would be surprised if the banks raised home loan interest rates faster than the RBA. "If you look at interest rates, the governor of the Reserve Bank has made it very clear that the emergency setting of 3 per cent for the official cash rate is unlikely to stay and there will be an upward move in rates over time," Sir Ralph told journalists on September 30.
The big four banks dominate the mortgage lending market, with about 85 per cent of Australia’s home loan market, says the Australian Prudential Regulatory Authority.
Commonwealth Bank remains Australia's biggest lender, with Westpac following as the second biggest home loan lender.
Home loan rates with the major banks currently sit between 5.74% and 5.81% but this could all change as early as today.
A rate rise of 25 basis points to a $250,000 mortgage means about an extra $35 per month on repayments, and if rate rise again on November, home owners could be looking at re-assessing their household budgets.
Some have called the rate rise too soon, saying the government stimulus packages could be wiped out over night by interest rate rises so soon.
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