ANZ and CBA hike variable home loans rates

ANZ and CBA have outdone Westpac with bigger rate hikes as likelihood NAB will soon follow suit lifts.

Mortgage house for sale on the black backboard.

ANZ Banking Group and Commonwealth Bank have outdone Westpac with larger rate hikes foisted on home loan borrowers, suggesting National Australia Bank is not far off with rate hikes of its own.

ANZ (ANZ) today said borrowers with variable home loans would face a 16 basis point rate hike from September 27. CBA (CBA), just moments after ANZ’s announcement, said it would be stinging borrowers with a 15 basis point hike by October 4.

The local dollar slid from US72.02 cents to US71.80c after the annoucements, indicating that out-of-cycle rate hikes were not yet fully priced in. Bank shares responded positively, with the four majors recovering towards the unchanged mark against a backdrop of steep broader market falls.

Westpac late last month ushered in the first round of rate hikes from the Big Four banks, made without a move in the Reserve Bank’s official interest rate, since late 2015. Westpac, the nation’s second largest lender, pushed through a rate hike of 14 basis points, citing the need to offset a persistent rise funding costs.

What rate hikes will cost average borrower

For ANZ owner occupiers who pay both principal and interest repayments, a new standard variable rate of 5.36 per cent will apply. For interest-only owner-occupiers, the rate has risen to 5.91 per cent. Investor borrowers with ANZ will be paying a 5.96 per cent rate while interest-only property investors will face a 6.42 per cent variable rate.

CBA borrowers will be paying a 5.37 per cent rate, and interest-only occupiers a rate of 5.92 per cent. Investors will pay a rate of 5.95 per cent and interest-only investors a 6.39 per cent rate.

“This was a difficult decision given we know the impact rising interest rates have on family budgets,” said ANZ Australia boss Fred Ohlsson.

“The reality is it is more expensive for us to fund our home loans on wholesale markets and we also needed to balance the needs of all stakeholders,” Mr Ohlsson said.

Commonwealth Bank retail bank boss Angus Sullivan said the bank had made the decision to hike rates after “careful consideration”. “We are very conscious of the impact that increasing interest rates will have on our customers, however it is important that we price our home loan products in a way that reflects underlying costs,” Mr Sullivan said.

“We understand this will have an impact on household budgets. To allow our customers time to prepare, this change will not take effect for four weeks, giving homeowners an opportunity to look at their options,” Mr Sullivan said.

Meanwhile, ANZ has carved out home loan customers in drought declared regional, noting that for 70,000 customers there would be no change to interest rates.

ANZ’s headline standard variable rate of 5.36 per cent and CBA’s 5.37 per cent still remain slightly below Westpac’s 5.38 per cent. National Australia Bank are expected to follow with rate hikes of its own shortly.

Brisbane-based bank Suncorp issued its second out-of-cycle mortgage rate increase this year under the cover of Westpac’s rate hike. At the same time Bendigo Bank subsidiary Adelaide Bank also rode under the cover of Westpac’s lead, pushing through a super-sized hike for interest-only loans.

The move comes despite the Reserve Bank having kept the official cash rate at a record low of 1.5 per cent since 2016, and a recent signal from governor Philip Lowe that official rates would remain low for some time. The Reserve Bank is increasingly concerned about rising interest rates amid stalled wages growth and growing household debt.

The Big Four banks control 75 per cent of the $1.6 trillion mortgage market and rate hikes are expected to add fuel to falling house prices, push households further into mortgage stress and stifle retail spending.

Rising interest rates in the banking sector are likely to further dent the property market, which is recording price falls in most capital cities.

Meanwhile, there are signs Australians are running down their savings levels, which have reached the lowest point since the global financial crisis.

At the same time some borrowers are showing signs they are no longer able to get ahead on repayments, with global ratings agency Standard & Poor’s this week warning that prepayment rates on mortgages had slowed.