CANBERRA—If the Reserve Bank of Australia (RBA) had any thoughts on raising interest rates again they have now probably been cast aside after the country's largest home lender raised its mortgage rates.
Already depressed consumers received a further dose of bad news today after the Commonwealth Bank of Australia announced it was raising its mortgage rates from Monday.
Like St George Bank last Friday and BankWest mid-week, the Commonwealth has raised its standard variable mortgage rate because, they say, their own funding requirements remain high.
From Monday, the Commonwealth's standard mortgage rate will rise 0.14 per cent to 9.58 per cent, although this will be fractionally below St George's 9.67 per cent rate.
Late in the day, the country's fourth largest bank, ANZ, also raised its standard variable mortgage rate by 0.15 per cent to 9.62 per cent from Monday.
"I can imagine the other banks are looking at what they should do in response," Lehman Brothers Australia chief economist Stephen Roberts said.
But, he said, it would take a fair bit of pressure away from the RBA having to raise its official rate again if inflation pressures don't subside.
"If they had any idea of a rate hike at the back of their mind, well it's already happened," Mr Roberts said.
But, he said, there was a risk the banks "might be going one step too far".
"They certainly have plenty of evidence from the leading indicators that the economy is turning down pretty rapidly."
Federal Treasurer Wayne Swan was unimpressed by the Commonwealth Bank's decision, while Opposition Leader Brendan Nelson said Prime Minister Kevin Rudd needed to take a "blow torch" to the banks to justify their independent rate decisions.
"I acknowledge the pressures placed on borrowing costs as a result of the global credit crunch, but banks do need to justify their actions to working families," Mr Swan said.
"As I have been saying for some time, these unofficial rate rises come at a time when families are already hurting from skyrocketing global oil prices and eight interest rate rises in just over three years."
Dr Nelson questioned why people with mortgages, credit cards and small businesses with overdrafts had to bear the brunt of the retail bank's funding pressures.
"Mr Rudd's got to put the blow torch on them to do this, explain to Australians why, with such huge profits, are they further increasing interest rates," Dr Nelson told reporters in Launceston, Tasmania.
An analysis by JP morgan this week said the big four banks - Commonwealth, ANZ, National Australia Bank and Westpac - could lose a combined $500 million if they didn't raise their mortgage rates again.
Their recent combined interim profits were some $8.8 billion.
Commonwealth's group executive retail banking services Ross McEwan said the bank was balancing the needs of its shareholders and customers by not passing on the full impact of the increased funding costs.
He said the cost of the bank's funding was more than one per cent above levels experienced pre-August 2007, excluding any increases by the RBA.
But the decisions by the banks come at a time when demand for new mortgages is falling like a stone.
Housing finance data released this week showed that over the past four months, the number of loans to owner occupiers has fallen by 25.2 per cent - the biggest slide in the nearly 30 years.
"They are putting up mortgage rates at a time when the housing finance data just seems to be collapsing," Mr Roberts said.
"This is a bizarre way to put some assets on your books."
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