Westpac toes the line on rates
Sydney Morning Herald
Thursday March 4, 2010
WESTPAC has followed its rivals in raising interest rates on its variable mortgages by 25 basis points. This time the bank has followed the Reserve Bank's lead after its supersized rates increase late last year caused a political storm.National Australia Bank also raised its mortgage rates by 25 basis points yesterday, rounding off the repricing after official interest rates moved to 4 per cent on Tuesday. Bendigo Bank was last night also preparing to lift rates by the same amount.The latest move takes Westpac's standard variable home lending rate to 7.01 per cent, one of the highest mortgage rates.In December Westpac sparked a furore after it lifted rates by 45 basis points, nearly twice the central bank's rate rise. Westpac blamed higher funding costs, particularly long-term funding, for moving above the overnight cash rate.Highlighting the intense competition for deposits, the big four also lifted rates on their online savings accounts by 25 basis points.From this morning ANZ's standard variable rate will be 6.91 per cent and the Commonwealth Bank's will be 6.86 per cent.NAB, which is pricing its variable mortgages at 6.74 per cent, continues to undercut its rivals even as its profit margins are squeezed by rising funding costs during the first quarter. It said yesterday funding costs were expected to go on rising over the year.NAB's chief executive, Cameron Clyne, has said he is prepared to absorb short-term costs to rebuild the bank's retail business.In contrast, a recent spate of earnings updates has revealed that other big banks have managed to fatten their interest margins over the past few months, mostly as they have repriced business loans.ANZ led the pack, boosting its margins 14 basis points during the first quarter, while CBA notched up a 13 basis point increase on the half-year.While short-term funding costs have fallen back closer to levels seen before the onset of the global financial crisis, the Commonwealth's chief executive, Ralph Norris, recently said the average cost of funding was still climbing."Obviously we're coming off a very low base prior to the [global financial crisis] and, when you look at the fact that our long-term book averages around 3.7 years, we're in a situation where we're still seeing a continual roll of low-cost funding being replaced with high-cost funding," he told an investor briefing.
© 2010 Sydney Morning Herald
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