Rivals angry at ANZ's Reserve Bank rate promise

AUSTRALIA'S biggest home lender has been rankled by ANZ's pledge to keep rate increases on mortgage rates in line with RBA movements.

ANZ chief Mike Smith has pledged to keep rate increases on variable mortgages in line with Reserve Bank movements / File

Rivals angry at ANZ's rate promise

AUSTRALIA'S biggest home lender has been rankled by ANZ chief Mike Smith's pledge to keep rate increases on variable mortgages in line with Reserve Bank movements.

The Commonwealth Bank, which accounts for 31 per cent of all home loans in Australia, yesterday refused to rule out boosting rates on variable mortgages above RBA actions, but claimed it had a better record than the other major banks on delivering cheap home loans.

So far ANZ remains the only retail bank to meet the call from Prime Minister Kevin Rudd to stay within the official rate cycle, a decision acknowledged yesterday by Treasurer Wayne Swan, The Herald Sun reports.

"I join with ANZ customers in welcoming this decision to do the right thing by the economy and pass on no more than official rate rises from the independent RBA," Mr Swan said.

"Any bank that chose to raise rates outside the RBA's official rate cycle can expect a strong backlash from both its customers and the community more generally."

Mr Smith has also cast doubt recently on whether other banks behaved responsibly in providing loans to some borrowers who used the government's first homebuyers grant.

He said ANZ had shied away from providing loans to some customers in the past year because they would have been stretched to service the debt in a rising rate environment.

CBA, which made the most new home loans to borrowers accessing the government scheme, hit back yesterday.

"Our actions of providing our customers with the lowest standard variable rate mortgage is evidence of our commitment, and in our opinion these actions speak louder than words," said CBA spokesman Steve Batten.

"Commonwealth Bank has had the lowest standard variable rate among the majors for at least 18 months and we will continue to assess our position on rates.

"We promise our customers that we will continue to offer competitive and attractive home loans."

BusinessDaily believes that ANZ's decision to fall into line with official monetary policy has angered senior executives at the other banks following a concerted campaign by the industry in the past year to sever the historical nexus between home loan rates and RBA movements.

NAB and Westpac refused to rule out additional rate rises, but a NAB spokeswoman said the bank did not have any plans yet to move outside the RBA cycle.

One major banking industry source said it was "a tad rich" for ANZ to take a moral stand and "the glory" on the home rate issue in light of it passing on the least rate cuts to borrowers when the RBA was easing monetary policy.

Bendigo Bank chief Mike Hirst said he had not given the Federal Treasurer an undertaking not to increase mortgage rates beyond changes in monetary policy.

"We haven't given one because we haven't been asked for one," Mr Hirst said.

"The reality is that the cost of funding costs has increased significantly in the last 18 months and that's out there for everybody to see.

"At some point the nexus needs to be broken between the cash rate and home loan rates because the former is not an appropriate reflection of the cost of funding loans."

The Reserve Bank is expected to raise the official cash rate by up to 50 basis points before the end of the year, with the next rise widely anticipated on Melbourne Cup Day.

Australia's second biggest home lender, Westpac, also refused to rule out that it may boost its variable mortgage rate beyond future official increases.

Spokesman David Lording said the bank would not comment on its rates policy ahead of RBA decisions on official rates.

"We do not want to pre-empt what the RBA might do," Mr Lording said.