Major banks pass on 50-bp rate hike

Following the Reserve Bank of Australia’s decision to increase the cash rate by its greatest amount in over 20 years, Westpac Banking Corporation (Westpac) became the first big four bank to announce that it will be following suit and increasing variable rates by 50 bps.

The changes will take effect from 21 June. 

It said it will also introduce a term deposit rate of 2.25 per cent per annum for 12 months to “support customers with their savings” from Thursday (9 June).  

Other deposit interest rates “remain under review at this time”, Westpac suggested.

Westpac consumer and business banking chief executive, Chris de Bruin, commented: “We know a change in interest rates affects every budget differently.  

“Our customers have managed their finances carefully during the pandemic, with many putting more funds aside in their savings and offset accounts. This means the majority of our customers are ahead on mortgage repayments and have a buffer available to help them manage an interest rate increase.”

Mr de Bruin added that customers could utilise the bank’s “range of tools”, such as its online repayment calculator, to help them manage their home loan repayments and “see how adjusting their loan amount, term or interest rate will impact them or help pay off their loan sooner”.

The bank highlighted that planning ahead, paying loans more frequently and maximising offset accounts could help variable-rate customers manage repayments. 

He suggested that any customers who need “some extra help or who are in financial difficulty” to contact the bank’s Customer Assist for personalised support as “soon as possible,” to determine a solution.

June’s rate hike is expected to be one of several coming down the track this year.

Westpac economists (as well as those at the Commonwealth Bank) are now forecasting that the RBA will hike official rates to 1.35 per cent when they next meet on 5 July 2022.

It suggests that the cash rate is then likely to move in 25-bp increments with “a pause”, as the RBA moves “above neutral to a peak in February [2023] of 235 basis points”.

Economist Bill Evans commented: “The key observation in the [RBA] Governor’s statement was: Inflation… is higher than earlier expected. Global factors account for much of the increase. But domestic factors are playing a role too, with capacity constraints in some sectors and the tight labour market contributing to upward pressure on prices.

“This statement clearly signals that the Bank now recognises that it has a significant challenge to contain inflation and today’s decision points to it now being prepared to act decisively.

“For that reason, we expect that the next move in July will also be a 50 basis point increase.

“A slowdown in the pace of hikes in August can be expected but a response will still be necessary to the likely upside surprise on inflation for the June quarter with a further 25 basis point move required.

“With the cash rate having reached 160 basis points by August it will be prudent for the Bank to pause. Our analysis of the leverage in household balance sheets points to a cash rate of around 160 basis points being ‘in the neighbourhood’ of neutral – better to pause at that point to assess the impact on household consumption; house prices; the labour market; consumer and business confidence; and the response of wages growth to these inflation pressures.

“We expect further increases of 25 basis points will be required in November and December in response to another disturbing inflation print for the September quarter. 2022 would end with a cash rate of 2.1 per cent – a policy stance that we would assess as in the contractionary zone.” 

ANZ, CBA and NAB changes to take effect on 17 June

Similarly, the Commonwealth Bank of Australia (CBA), Australia and New Zealand Banking Group (ANZ) and National Australia Bank (NAB) all announced on Wednesday (8 June) that they would be passing on the full increase to variable-rate borrowers from next Friday (17 June).

In making its decision, ANZ said it considered various factors including the change in the official cash rate, along with the impact on customers, business performance and competition.

The bank estimated that the change will increase monthly repayments by $115 on an average home loan of $450,000 for an owner-occupier paying principal and interest.

ANZ’s group executive Australia retail, Maile Carnegie, said: “We know rate changes affect customers differently and some may be looking for support as they reorganise their household budgets, particularly if they haven’t experienced many rate increases before. 

“ANZ is here to help and for customers seeking more information about how to manage their finances, we have a number of ways to support them, including a free home loan check-in that can help them reorganise their loan so it continues to meet their needs. 

“Many of our customers remain in good financial condition to manage rate rises with about 70 per cent ahead on repayments. A large number of them have built up buffers after not changing their repayments when rates reduced over several years.”

ANZ said it was also “reviewing its current savings rates”, but would offer a new rate for its 11-month Advance Notice term deposit of 2.25 per cent p.a. from Monday (13 June 2022) to “help customers with their savings goals”.

The bank’s economists have said they believe the RBA will raise rates by 25 bps in July, 50 bps in August, with two more increases after that.

Meanwhile, CBA’s new standard variable reference rates will therefore be as follows:

• Owner Occupier Principal and Interest Standard Variable Rate home loans will increase by 0.50 per cent per annum (p.a.) to 5.30 per cent p.a.
• Investor Principal and Interest Standard Variable Rate home loans will increase by 0.50 per cent p.a. to 5.88 per cent p.a.
• Owner Occupier Interest Only Standard Variable Rate home loans will increase by 0.50 per cent p.a. to 5.79 per cent p.a.
• Investor Interest Only Standard Variable Rate home loans will increase by 0.50 per cent p.a. to 6.14 per cent p.a.

CBA’s group executive, retail banking, Angus Sullivan said: “We are here to support Australian households who may be concerned about their home loan repayments. We encourage customers to contact us to discuss the options available to them including ensuring offset accounts are set up and linked to their eligible home or investment loan.”

The bank said it would also increase the bonus interest rate for select savings products by the same amount from next Friday (17 June), too. p.a.

The GoalSaver bonus interest rate will increase to 0.75 per cent p.a while the Youthsaver bonus interest rate will increase to 0.95 per cent p.a.

The bank will also be extending the availability of its 18-month Term Deposit special offer of 2.25 per cent p.a.

Mr Sullivan commented: “It has been a challenging time for many savers who have experienced a long period of record low interest rates. We hope these changes provide some much needed support for our customers looking to save...

“Along with our increased bonus rates for GoalSaver and Youthsaver, the extension of our 18-month Term Deposit special provides a range of options for our customers to get an increased return on their savings.”

Speaking on behalf of NAB, the bank’s group executive, personal banking, Rachel Slade, said that the 50-bp increase would see NAB owner-occupier customers paying principal and interest on a 30-year $400,000 Choice package pay an additional $116 a month on their repayments.

“Our decision today reflects the domestic and global environment, including changes to official cash rates,” Ms Slade said.

“We have 930,000 home loan customers and we are here to support them as interest rates rise. The cost of living is also increasing and our message to any of our customers who may be concerned is that we are here to help.”

NAB is also offering a special 12-month Term Deposit interest rate of 2.25 per cent to support customers with their savings, with Ms Slade noting that “historic low-interest rates have been difficult for them”.

Other savings and deposit interest rates “continue to be under review”, it said.

MyState Bank to lift on 20 June

Some non-major lenders have also begun lifting rates.

MyState Bank revealed it would increase its variable rates by 50 bps (0.50 per cent), effective Monday (20 June 2022) for both new and existing customers.

MyState Bank’s general manager of banking, Huw Bough, commented: “Our home loan customers are also facing the second interest rate rise this year, after 11 years without one.

“Over the past month our customer care teams have been assisting customers with their questions and concerns. We will always advise our customers when interest rates change and let them know what the minimum monthly repayments will be, so they can work that into their budgets.

“We’re encouraging our customers to prepare for more interest rate rises in the months to come. Looking at household budgets now will help you manage any future changes.

“As a responsible lender MyState strictly assesses customers’ repayment capacity as part of their application, which includes a serviceability buffer above current interest rates.”

However, the lender also announced that it would be passing the rate hike onto Bonus Saver account holders too, effective from next Wednesday (15 June).

This increase is to be applied to accounts for new and existing customers, taking the maximum monthly interest paid to 1.6 per cent (once eligibility requirements have been met).

MyState is also increasing interest paid on term deposit accounts by up to 1.85 per cent, taking the new headline rate to 3.00 per cent for a 24-month term.

Mr Bough said the move was “good news for customers”.

“This is in addition to increasing a number of term deposit rates for the second month in a row. As a challenger bank we can be more nimble and competitive in our decisions, and we’re keen to get this interest rate boost applied to our customers’ accounts as soon as we can to help their savings work harder,” he said.

[Related: RBA opts for 50-bp cash rate hike]