ANZ, Commonwealth Bank follow NAB and Westpac in hiking interest rates

Customers of Commonwealth Bank of Australia (CBA) and Australia and New Zealand Banking Group (ANZ) could see a surge in interest rates – of more than 20 basis points for investor loans and 10 basis points for owner-occupiers. The development comes in the wake of National Australia Bank (NAB) and Westpac upping their interest rates out-of-cycle with the Reserve Bank last week.

CBA has the lowest advertised variable rate, 5.22 percent, and so it can adjust prices for owner-occupiers. In comparison, the variable rate offered by NAB and Westpac is 5.32 percent. ANZ’s number for the same stands at 5.25 percent.

“The trend is the banks cover for each other, with maybe a bit more pain being taken by the first-mover,” Steve Mickenbecker, finance expert with comparison website Canstar.com.au, said. “I expect any day almost an announcement to be made, they’re falling more or less into line.”

According to Graham Cooke, insights manager at comparison website Finder.com.au, the move was not startling. “It’s been relatively quiet on the cash rate front in recent months, and with many believing a rate rise won’t occur until next year, it was only a matter of time,” he said.

“Whether it’s to increase flexibility or boost profit margins, banks are under fire to manage stakeholder expectations while also dealing with the risk of an overheated property market,” he added. Investors and owner-occupiers should expect a rise in loan costs.

Last week, NAB increased its investment loans across Australia by 25 basis points to reach 5.8 percent. This comes on the heels of banks enhancing their rates in an effort to comply with APRA’s growth cap.

Amid the development, analysts have expressed concern regarding increasing risks brought by higher interest rates and bank funding costs. On the other hand, banks have said high borrowing costs will not adversely affect their mortgage books. According to JP Morgan, banks will be able to increase investor mortgage rates by 3 percent at the most in the upcoming years.

“We have not announced any changes to those rates since NAB and Westpac made changes last week,” a spokesman for ANZ said. Similar sentiment was expressed by CBA. “We have nothing to add on the announcements by Westpac and NAB,” a CBA spokesman said. According to the minutes from the most recent RBA board meeting, the interest rates will be left unaltered this year by the central bank.