Macquarie, the Commonwealth, the NAB and the ANZ have followed Westpac in announcing they would pass on the full 50 basis point rate increase to their customers as investors, worried about bad debts, again sold off the big four banks and a few others such as Bendigo Bank.
Bank of Queensland will also pass on the half a per cent increase in full.
While the banks were busy talking and raising rates, banks shares fell sharply on Wednesday as investors continued to worry about the impact of higher rates on the wider economy (which is what the RBA wants to see happen).
The ASX 200 climbed 0.4% higher adding 25.4 points to close at 7121.1 points. The Bank of Bendigo saw its shares down more than 7.1% which made it the biggest loser in the key index.
Commonwealth Bank shares fell 4.7%, NAB shares, lost 3.95%, ANZ shares were down 2.3% and Westpac’s 6.1% drop was big and came after it was the first bank to lift rates on Tuesday night.
The CBA said that most its Owner Occupier Standard Variable Rate home loan will see an increase of 0.50% a year to 5.30%, the variable investor loan will see a rise to 5.88%, the interest only loan for owner occupiers will rise to 5.79% and the investor interest only loan will see a half a per cent rise to 6.14%.
The CBA’s announcement was the more important because it is the biggest home lender in the country and it made it clear it was a full pass on of the RBA’s 0/505 increase in the cash rate, with an extension of its own 2.25% term deposit product that Westpac highlighted in its Tuesday night announcement.
The Commonwealth said it would increase the bonus interest rate for several of its savings products by 0.5% and extend the availability of its 18-month term deposit offer of 2.25%.
The banks are pushing 12- to 18-month term deposits with apparently ‘high’ rates of 2.25% to lock in customers and stop them looking elsewhere.
The NAB today announced changes across its home loan products as well as a term deposit offer. The standard variable home loan interest rates will increase by 0.5%, and customers can access a 12-month Term Deposit special for their savings with a 2.25% rate.
As the Reserve Bank, the government and the banks stress, mortgagees have around 21 months of pre-payments in their bank accounts as many are repaying their home loans faster than their actual interest rate, to pay down the principal faster and to help them budget ahead of any rate rise, which should stand them in good stead in the next year or so.
Those excess deposits have been earning very little interest for the past two years or more so the 2.25% (fixed for a year to 18 months) is priced to look good as a place to leave you money at the bank you have borrowed from and not look for a new home loan at a slightly better rate.
This term deposit will also help the banks put a base cost into their net interest margins at a time when they should be either steadying or starting to rise with after the RBA’s 0.75% of increases in the cash rate and more to come.
In times of rising rates bank net interest margins start rising slowly or steady (they really do well when rates start falling and the banks are slow to cut their loan costs to borrowers) but eventually get a boost once the higher rates kick in.
