Westpac rates increasing... will the others follow suit?

[Guest Carol from Vista Financial]

So late yesterday (after I finished my other post, naturally) Westpac announced it will be increasing rates by 0.14% p.a. quoting increased wholesale funding:

In particular the bank bill swap rate, which is a key wholesale funding rate for mortgages, increased by about 25 basis points between February and March this year and has remained elevated.
“We initially hoped that this increase would be temporary, and therefore we have incurred these costs over the last six months. The rate changes announced today will not recover these costs..."

- Official Westpac Media Release, 29 August 2018

I.e we didn't increase them then, but we are now, and not by the full amount needed cover costs. Interpret that as you may.

So the big question is when/if this will cause a domino effect with the other big banks? There have been rises in smaller banks but none of the big four, perhaps due to the target already firmly on their backs as a result of the Royal Commission. Will they follow suit hoping that Westpac will take the first wave of anger and disapproval? Or will they stand fast in an effort to claw back a little customer sentiment? (Along with some nicely crafted marketing giving themselves a cheeky gold star of course). No doubt we will find out shortly.

Bottom line, the only real way to guarantee your rate and repayment is to be on a fixed rate, but they come with restrictions - so do you homework first to see if it is right for you.

As I have already mentioned elsewhere rates are so low at the moment that when they eventually go up again it will be a shock to the system for many that have only ever known low rate environments. So prepare yourselves. Those of the era of double-digit interest rates know what I mean. The RBA knows it too and have flagged rising rates as something to prepare for. Some economists now argue this recent move by Westpac (and potentially by others) may now delay any increase decisions by the RBA.

Time will tell.

Edited August 30, 2018 by Carol from Vista Financial
Typo sorry!

[Guest Carol from Vista Financial]

Well. That didn't take long. Not the other big four though....yet.

Adelaide Bank and Suncorp have jumped on the bandwagon and announced further rate increases today:

"Suncorp will increase all variable home loan rates by 0.17 percentage points from September 14. Suncorp's small business loans will rise by 0.1 percentage points. Adelaide Bank, a subsidiary of the Bendigo and Adelaide Bank, will raise rates on its owner-occupier and investor loans by between 0.12 and 0.4 percentage points."

Challenging market and cost of funding still quoted:

https://www.afr.com/business/banking-and-finance/adelaide-bank-blames-challenging-market-for-raising-variable-rates-by-12bp-20180830-h14rhc

The day is not over yet....

[Guest Carol from Vista Financial]

ANZ increases their rates first, CBA follows a few minutes later

CBA increase by 0.15%

ANZ increase by 0.16%

You can read their media releases here:

CBA announcement

ANZ announcement (note here they have advised that those people living in postcodes they have deemed as drought affected will also have an equivalent increase in a discount - which means they don't escape the base rate rise, but are given a discount of the same 0.16% so they aren't impacted)

No word on NAB just yet.

[Guest Carol from Vista Financial]

Seems NAB are taking advantage of the situation here...

As you may have heard already there has been no move by NAB to increase their rates - their media statement saying they are holding them for now in an effort to 'rebuild customer loyalty'.

Is this the case or are they just being opportunistic in an effort to capture market share? If they do eventually move rates to account for increased funding costs like the others, are they merely setting themselves up for a bigger fall from a moral high ground? I think their marketing team will have to prove their worth and really pull a rabbit out the hat if/when they do increase them.