The other big three lenders are expected to follow ANZ’s lead in increasing interest rates for mortgages and small business lending.
ANZ announced on Friday that it was increasing interest rates for variable rate mortgages and small business lending by 0.06% a year, with the standard variable mortgage rate increasing to 7.42% a year.
The move came despite the Reserve Bank of Australia’s decision to leave the cash rate on hold at 4.25% and continued pressure from the Australian Chamber of Commerce and Industry and the Australian National Retailers Association for the RBA to cut rates.
The increase to ANZ’s small business rate will add $1.50 per week to an average business loan of $130,000.
ANZ’s Australian chief executive, Philip Chronican blamed the rate rise on a “dramatic” change in the funding environment which resulted in funding costs rises and increased competition among banks for deposits.
“We accept our response to the new funding environment is difficult for some of our customers,” Chronican said in a statement accompanying the announcement.
“Despite being the only bank that has committed to having a transparent process to review its lending rates, since we moved to reviewing variable rates each month ANZ customers have not been unfairly disadvantaged relative to the rest of the market.”
Dominic Lambrinos, director of Easybizfinance, told SmartCompany the bank’s decision to decouple its rate changes from the RBA was making life difficult for business.
“It is very difficult as a business to manage your affairs if the private sector, who is a bank, decides to change interest rates and by doing so affects demand and supply in the economy,” said Lambrinos.
“It is bad enough having the government doing it and now you have the government and four banks doing it.”
Lambrinos warned the other lenders would follow.
“I think there is a lemmings effect amongst the banks,” he said.
“One does what the other does.”
The financial comparison website RateCity also predicted the other big three lenders would follow ANZ’s lead.
“Now that ANZ has given other lenders the ‘green light’ on lifting rates, we expect that other lenders, including the major banks, will follow their lead,” said Damian Smith, chief executive of RateCity.
“Unless borrowers apply the pressure back to ANZ and other lenders, they will keep increasing rates in these small increments.”
“Comparing, negotiating and switching is vital to stop these out-of-cycle rate rises.”
Consumer group CHOICE criticised the increase and claimed it showed the bank’s continued willingness to take its customers for granted.
“ANZ have decided to go their own way when it comes to raising rates, and their customers should take that as an invitation to consider going their own way as well,” said Matt Levey, CHOICE head of campaigns.