NAB and CBA react to RBA interest rate hike while ANZ and Westpac remain silent
Australia’s second-largest bank reacted to rising interest rates and joined the NBA, unsurprisingly choosing to pass the entire hike on to its customers.
Tuesday, the RBA raised interest rates by 25 basis points. This took the spot rate from 2.6% to 2.85%.
It was the seventh month in a row that interest rates were raised, from a record low of 0.1% that had dominated throughout the pandemic.
On Wednesday, the Commonwealth Bank announced that it would raise its variable interest rates on home loans by 0.25% from November 11.
It followed NAB, which became the first bank to pass on the hike less than two hours after the RBA lifted rates.
Angus Sullivan, group director for retail banking, at the CBA, said the bank was looking at other ways to help customers ease cost-of-living pressures, including launching a hub to help customers track their savings, expenses, bills, and mortgage features. .
“We understand that the rapidly changing pricing environment may raise questions for some of our customers and we are here to help,” he added.
NAB also said it was passing on the full 0.25 rate hike, which would take effect next Friday, November 11.
This is bad for customers with a home loan, but good for anyone with a savings account or term deposit, who will now enjoy a higher return from that date.
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The other big banks – ANZ and Westpac – have yet to break their silence on the RBA’s announcement.
However, in the past, all major banks have passed on the cost of rising rates to customers.
NAB said last month it raised savings products by 0.25% in response to rising rates and its introductory iSaver rate increased by 0.70%, while its deposit rates futures had risen to 1.5%.
Since the interest rate began to rise in May, NAB said it has made more than 40 changes to its savings accounts.
Currently, an owner making principal and interest payments to NAB pays a rate of 5.95% per annum.
For Australians struggling to make their mortgages – apparently one in four, according to a recent Finder survey – they still have some options.
Rachel Slade, NAB Group Director for Personal Banking, said: “For those who find rising interest rates a challenge, banks have a vital role to play in providing support.”
RBA Governor Philip Lowe said they decided to raise the rate by 25 basis points as inflation is expected to reach 8% by the end of the year.
“A further increase in inflation is expected over the coming months, with inflation now expected to peak at around 8% later this year,” he wrote in a statement.
“The Bank’s central forecast is for CPI inflation to be around 4¾% in 2023 and just above 3% in 2024.”
He warned that this would not be the last interest rate hike.
“The Board has raised interest rates significantly since May,” Lower continued.
“This was necessary to establish a more sustainable balance of demand and supply in the Australian economy to help bring inflation back to target.
“The Council expects to raise interest rates further in the period ahead. It is closely monitoring the global economy, household spending and wage and price setting behavior.
Inflation currently stands at 7.3%, according to the latest report.
Graham Cooke, head of consumer research at Finder, acknowledged that times were tough.
“This seventh consecutive rate hike will be a bitter pill for many to swallow,” he said.
“The current round of rate hikes has added nearly $11,000 to the annual cost of a $500,000 mortgage.”
Although Tuesday’s announcement will add several hundred more dollars to monthly home loan repayments, it will result in thousands of wasted dollars in the long run.
Compare Market found that a $500,000 mortgage will have to pay $76 more per month after Tuesday’s increase.
However, over the life of the loan, this equates to an additional $27,000 going back to the bank in interest.
Along the same lines, an Aussie on a $1 million loan will need to shell out an additional $152 to keep their loan in check.
But that’s a whopping $54,000 over the life of the loan.