CUP DAY RATE CUT NOW A GOOD BET
THE Commonwealth Bank’s move to hike mortgage rates without cue from the Reserve Bank has heightened chances of a cut to the official interest rate next month, analysts say.
Economists say the RBA board is increasingly likely to cut the cash rate when it meets on Melbourne Cup day to offset the impact of higher rates for homebuyers.
The CBA – Australia’s biggest home lender – announced late yesterday that it was jacking up interest rates on its home loans by 0.15 percentage points, including loans for owner occupiers. The move comes after Westpac last week hit home loan customers with a 0.2 percentage point rate hike.
CBA retail banking group executive Matt Comyn said the hike would “partially” offset the costs linked to a push by regulators for Australian banks to bolster their books.
Meanwhile, the nation’s chief banking cop attacked the industry for historically poor lending standards.
Australian Prudential Regulation Australia chairman Wayne Byres said some Australian banks’ lending standards were “lacking in commonsense” before regulators began a crackdown this year.
“With the benefit of hindsight, obviously we wish we had got on to this a bit sooner but ... if we act too soon we get accused to being too interventionist in managing institutions,” Mr Byres said.
APRA has pushed the banks to set aside more cash as a buffer against a future financial crisis, and major lenders have this year tapped investors to the tune of $20 billion to help appease the regulator.
The CBA will hike its standard variable home loan rate to 5.6 per cent on November 20. The bank’s standard interest rate for investment properties will rise 0.15 percentage points, to 5.87 per cent.
The Aussie dollar fell from US72.31¢ to US71.95¢ as currency traders factored in a higher chance of a rate cut when the RBA meets next month.
ANZ and National Australia Bank are expected to follow the bigger lenders.
Mr Comyn said his bank had raised $5.1 billion from investors to strengthen its capital position and it had to balance the capital burden fairly.
“Any decision to change interest rates is carefully considered,” he said. “The cost of the new capital required to make the Australian banking system more secure needs to balance the interests of our customers, as well as the nearly 800,000 households who are direct shareholders and the millions more who are invested through their superannuation funds.’’
AMP chief economist Shane Oliver said the CBA move increased the likelihood of an RBA rate cut next month to ease the pain for consumers.
“With only one bank moving they might have concluded it was a one-off,” Dr Oliver said.