All four major banks respond to RBA’s interest rate hike

The last of Australia’s four major banks has announced it will be passing on the latest Reserve Bank cash rate increase to borrowers.

All of Australia’s four major banks have moved swiftly to pass on the latest Reserve Bank cash rate increase to borrowers.

As widely expected by economists, the RBA on Tuesday raised the cash rate target by 50 basis points to 1.35 per cent.

Since April, the cash rate has risen by 1.25 percentage points, after three months of back-to-back increases by the central bank.

Westpac was the last of the banks to announce it would also increase its standard home loan variable base rate by 0.50 per cent. The change will be effective from July 20.

“We considered several factors in making this decision including the 0.50 percentage point rise in the official cash rate and ongoing increases in the cost of funding, as well as the needs of both borrowers and depositors,” Westpac chief executive of consumer and business banking Chris de Bruin said on Wednesday.

“To further support savers following a period of low rates, we’re increasing the standard variable base rate on Westpac Life, one of our most popular savings accounts, and introducing a new term deposit rate.

“We know that some customers will be reassessing their household budgets as home loan interest rates rise. While the majority of our home loan customers are ahead on repayments and in a good position to adapt to interest rate changes, some may find it more challenging.

“We have a dedicated team to assist customers potentially facing financial difficulty, who provide personalised support including giving customers more time to get their finances back on track. We’re also engaging with our customers coming off fixed rate terms to help them understand the home loan options available and plan for future adjustments,” Mr de Bruin said.

NAB has also announced its standard variable home loan interest rate will increase by 0.50 per cent per annum, effective from July 15, 2022.

NAB Group Executive Personal Banking, Rachel Slade, assured customers the team at NAB would be working closely with them to provide support throughout this time.

“Banks are here to serve their customers, so regardless of who you bank with, the first step is a conversation with a banker so we can find the best way to support you,” Ms Slade said.

“Overall, our customers are in a good position with many ahead on their repayments. For any customer who is interested in understanding what the increasing interest rate environment means for their home loan, or concerned about their financial situation, we are here to help.”

The bank will also bring in changes to its savings accounts, with its Reward Saver increasing by 0.50 per cent p.a. and the 12-month Term Deposit account increasing to 2.50 per cent p.a.

Stream more finance news live & on demand with Flash. 25+ news channels in 1 place. New to Flash? Try 1 month free. Offer ends 31 October, 2022 >

ANZ and Commonwealth Bank have passed on the latest Reserve Bank cash rate increase to borrowers.

ANZ also announced on Wednesday it will increase variable interest rates across its Australian home loans by 0.50 per cent p.a.

The increase will see monthly repayments rise by $119 on an average home loan of $450,000 for an owner occupier paying principal and interest.

The variable interest rate index changes will be effective from July 15, 2022.

“As the cost of living has risen, some customers may be looking for support while they reconsider their household budgets and ANZ is here to support them,” ANZ Group Executive Australia Retail, Maile Carnegie, said.

“We helped nearly 100,000 customers manage their home loans through the pandemic and our teams are ready to help now with a range of support options, including a free home loan check-in that can help them reorganise their loan so it continues to meet their needs.”

ANZ will also increase the bonus interest rate on Progress Saver accounts and ANZ Plus accounts by 0.50 per cent pa.

The Commonwealth Bank of Australia (CBA) was the first of the four major banks to respond to the RBA cash rate decision.

“Following the Reserve Bank of Australia’s (RBA) cash rate decision, CBA will increase home loan variable interest rates by 0.50% p.a,” the bank said in a statement.

Commonwealth Bank of Australia (CBA) has become the first of the major banks to pass on the latest RBA cash rate increase to borrowers. Picture: NCA NewsWire/Bianca De Marchi

As a result, Owner Occupier Principal and Interest Standard Variable Rate home loans will increase by 0.50 per cent per annum to 5.80 per cent p.a.

Investor Principal and Interest Standard Variable Rate home loans will increase to 6.38 per cent p.a., Owner Occupier Interest Only Standard Variable Rate home loans will jump to 6.29 per cent p.a. and Investor Interest Only Standard Variable Rate home loans will increase to 6.64 per cent p.a.

The new home loan variable interest rates will take effect on July 15, 2022.

Group Executive, Retail Banking, Angus Sullivan, urged customers to contact CBA if they had any requestions regarding the rate rise.

“We are here to support our customers and have a range of tools to help them manage their repayments online, including aligning them to when and how often they are paid, along with tools to help them budget and track their spending, such as Spend Tracker in the CommBank app,” he said.

“We understand the rapidly changing rate environment may raise questions for some of our customers and we are here to help them. We encourage our customers to message us in the CommBank app to explore different support options or to connect with a home lending specialist.”

CBA also announced it would be increasing the interest rates for a number of saving products.

GoalSaver with bonus interest will increase to 1.25 per cent p.a., YouthSaver with bonus interest will increase to 1.45 per cent p.a. and there will be a new 15-month Term Deposit Special offer of 2.50 per cent p.a.

Westpac is yet to move on Tuesday’s RBA decision.

The big four banks all passed on the full 0.50 percentage point rise in June to their existing mortgage customers.

For a typical owner-occupier with a $500,000 mortgage and 25 years remaining, yesterday’s increase will see their monthly repayments rise by another $137, according to RateCity.

Their total increase to date from the May, June and July rate hikes would be $333 per month.

A borrower with a $1 million mortgage, Tuesday’s decision will add $273 to their monthly repayments, bringing their total increase to $665 per month since April.

“Australians are potentially staring down the barrel of the steepest RBA hikes since 1994,” said RateCity research director Sally Tindall.

But while borrowers will feel the brunt, savers are unlikely to receive the full benefit.

RateCity notes that last month, CommBank passed on 0.50 percentage points to its GoalSaver and YouthSaver customers, but on its NetBank Saver it only increased the introductory rate by 0.30 percentage points, only benefiting new customers for the first five months.

The big four banks on average increased their ongoing savings rates by 0.46 percentage points after the May and June hikes, which totalled 0.75 percentage points, according to RateCity analysis.