Banks to add more to RBA rate rises

02/11/2009

Borrowers are likely to be slugged by more rate rises from RBA and more margin expanding rate rises from the big banks as well.

The Reserve Bank is tipped to move rates up by 0.25 per cent, or even 0.5 per cent, tomorrow on Melbourne Cup Day.

Stock market analysts expect the big banks to increase rates by even more than the RBA’s rate rises in order to expand their margins. John Buonaccorsi from Austock said banks “will pile on the re-pricing from here.“ Since November 2007, the big four banks have raised the margin between their standard variable mortgage rate and the RBA’s cash rate from 1.8 per cent to 2.7 per cent.

Buonaccorsi said banks will continue to raise their margins while borrowers couldn’t really go any where else because other mortgage originators are struggling to find funds to lend. Last week ANZ chief executive Mike Smith backed away from a commitment not to raise rates by more than the RBA’s cash rate changes.

Source: Herald Sun