Banks are ready to ratchet up loan rates

BANKS are expected to follow the RBA's advice this week, hitting struggling home owners with yet another independent rate rise.

Banks are ready to ratchet up loan rates

BANKS are expected to follow Reserve Bank governor Glenn Stevens' advice this week, hitting struggling home owners with yet another independent rate rise.

Leading market analysts say banks believe the gap between the Reserve Bank's cash rate and their interest rates is still too small.

They predict the major banks will follow the lead of the Commonwealth Bank, which upped its rates by 12 basis points to 9.44 per cent on Friday.

Analyst Dale Gillham, from Wealth Within, told The Daily Telegraph  bank loan rates had not reached the ceiling, regardless of whether or not the RBA increases its cash rate or keeps it on hold.

"The banks are protecting their bottom line because the cost of their money has gone up more than what the RBA rates have gone up,'' he said.

"Weeks ago when I was chatting with the big banks, several economists said they were more than 30 basis points away from those margins.

"So there is probably another 10 or 20 basis points to come, independently of the RBA. and I would say it is very likely they will go this week.''

A bank analyst who wished to remain anonymous also believed banks would increase rates as soon as this week.

The grim prediction comes two days after the RBA chief reiterated his seemingly unhelpful stance that banks were free to lift their own rates.