Weird reaction of banks to rate rise

Weird reaction of banks to rate rise

Australia’s largest banks have still yet to pass on rising interest rates to customers two days after the initial announcement in a baffling move.

The Reserve Bank of Australia (RBA) hiked interest rates on Tuesday for the fourth consecutive month.

Australia’s central bank increased the interest rate by 50 basis points, or by 0.5 per cent, bringing the cash rate from 1.35 per cent to 1.85 per cent, largely in line with economist’s predictions.

But currently Australia’s biggest four banks — The Commonwealth Bank (CBA), ANZ, NAB and Westpac — haven’t made any announcements about the latest rate hike.

That’s despite the fact but they were swift to pass the buck onto customers for the previous three months.

Since May, the cash rate has risen by 1.75 percentage points, after four months of back-to-back increases by the central bank and so far it appears like the majority of Australians have caught a break.

However, it’s unclear how long the banks will stay silent about the rate rise. News.com.au has contacted all four for comment.

In stark contrast, within hours of the announcement, a smaller bank, Macquarie Bank passed on the rate rise.

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Macquarie Bank said it would increase variable mortgage rates by 0.5 per cent by August 12.

Rates on its savings and everyday transaction accounts also increased by by 0.50 per cent.

The move impacts the estimated 2 million people that are customers of Macquarie Bank.

However, CBA, ANZ, NAB and Westpac have between 8.5 million to 17 million customers each, according to Statista.

Last month, Westpac gave customers the most amount of time to prepare for a change in its variable mortgages and also its savings rates, taking two weeks for the change to come into effect – although it announced the change within 24 hours.

The other three banks passed the change onto customers within 10 days after a swift response.

The August hike isn’t expected to be the last, with economists forecasting that interest rates could peak up to two per cent by the end of the year.

Tuesday’s rate rise means those paying off the average home loan of $500,000 will need to cough up an extra $140 a month.

Tuesday’s decision marks the first time the RBA has lifted the rates for four months in a row since the introduction of the two to three per cent inflation target in 1990 in a sign of the inflation and cost of living crisis across the country.

This follows last week’s increase in annual inflation, which hit 6.1 per cent, which was its highest level in 21 years since 2001.

Tuesday’s rate rise means those paying off the average home loan of $500,000 will need to cough up an extra $140 a month.

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