Australia's big banks raise mortgage rates, risk political backlash
* Three biggest lenders have now raised rates
* Stock market down amid concerns of house price squeeze
* Australian central bank not expected to raise rates until
(Adds UBS analyst quote)
By Byron Kaye and Rushil Dutta
SYDNEY/BENGALURU, Sept 6 (Reuters) - Two of Australia's
biggest banks, Commonwealth Bank of Australia and
Australia and New Zealand Banking Group, raised
mortgage rates citing higher funding costs, cutting chances of
an official rate hike and risking a political backlash.
The moves on Thursday came a week after No. 2 Australian
lender Westpac Banking Corp became the first of the
so-called "Big Four" to raise rates. Fourth-ranked National
Australia Bank Ltd is the only one of the majors not to
deliver an out-of-cycle rate rise.
The decision reverses, at least partly, moves of just a
month earlier when some banks cut rates as a downturn in the
country's red-hot housing market heightened competition to write
The rate increases come even as the Reserve Bank of
Australia has held its official cash rate at a record low of
1.50 percent since 2016 and signaled a steady path for some
The Australian dollar was 0.15 percent weaker after CBA, the
country's biggest lender, and third-ranked ANZ announced their
rate hikes within minutes of each other.
The benchmark ASX/S&P index added to morning losses,
down 1.1 percent by the close, as investors digested the
prospect that rising rates would hurt home prices further,
The banks erased most of their earlier losses, trading down
about a third of a percentage point, amid hopes the rate hikes
would preserve their interest margins.
"It's a small negative for housing prices but part of a much
larger trend towards the normalisation of interest rates," said
Michael McCarthy, Chief strategist at CMC Markets and
"That of course is likely to continue to keep pressure on
housing prices," he added.
The four banks combined control about 80 percent of the
country's deposit and home loan market. The banks have come
under intense scrutiny, wiping tens of billions of dollars from
their market capitalisations, from a public inquiry which has
aired continuous allegations of misconduct within the sector.
In a client note, UBS analysts said the hikes appeared to be
far larger by dollar value than the funding cost increases cited
by the banks, and the out-of-cycle move raised the chances the
government would raise a new special tax on banks.
"Today's announcements demonstrate the oligopolistic nature
of the Australian banks and their ability to pass on additional
funding costs and more to their customers," the note said.
"Given the additional focus from both sides of politics (on
the banking sector) there is a risk the government or opposition
may look to raise the bank levy," it added.
ANZ said in its statement that its rate hikes would not
apply to people in areas declared to be officially in drought.
A month after cutting variable home loan rates by 0.34
percent, it said it would now raise variable rates by 0.16
CBA, which recently cut some fixed mortgages by 0.10
percent, said it was now hiking rates by 15 basis points.
A spokeswoman for NAB, the only lender not to lift rates on
Thursday, said in an email the bank continually assessed
interest rates and tried to "achieve the right balance for our
customers and our shareholders, and to ensure we remain
(Reporting By Rushil Dutta, Additional reporting by Nikhil
Nainan in Bengaluru; Editing by Byron Kaye and Muralikumar
First Published: 2018-09-06 05:23:17
Updated 2018-09-06 10:34:15
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