Which banks pass on interest rates to borrowers? And the savers?

On Tuesday, the Reserve Bank of Australia (RBA) raised interest rates by 0.25 percentage points, bringing the cash rate target to 2.6%.

While major lenders were slow to react to last month’s rate hike, the country’s big four banks were quick to announce they were passing the hike on in full to customers with variable mortgage rates.

Some of the increases will be passed on to savers, but the amount of benefit to savers varies from bank to bank.

Here’s a breakdown of what the big banks are doing.

ANZ Bank

Mortgage rate: Variable interest rates on ANZ home loans will increase by 0.25% per annum from Friday 14 October.

Savings rate: ANZ will increase the interest rate on its Plus Save accounts by 0.25% from Wednesday 12 October, bringing the new maximum rate to 3.25%.

On the other hand, the rate is unchanged for Progress Saver and Online Saver customers.

Commonwealth Bank

Mortgage rate: The standard variable interest rate on ABC home loans will increase by 0.25% per annum from Friday 14 October.

Savings rate: The ABC will raise rates on a range of savings accounts, including:

  • Lens Saver: Will increase by 0.3% to a new maximum rate of 2.4% from Friday, October 14
  • Netbank Saver: The standard variable interest rate will increase from 0.25% to 1.10%, and the introductory five-month variable rate will increase from 0.70% to 3% effective Friday, October 14.
  • Youth saver: The subsidized interest rate will increase by 0.3% to reach a maximum rate of 2.6% as of Friday, October 14.
  • 12 month term deposit: Will increase by 1.35% to 3.35% from Monday, October 10
  • Special 18-month term deposit: Will increase to 3.70% from Monday, October 10.

Macquarie Bank

Mortgage rate: Macquarie’s variable home loan benchmark rates will increase by 0.25% per annum from Friday 14 October.

Savings rate: Macquarie has announced rate increases for a range of savings accounts, including:

  • Savings account for new customers: Will increase 0.3% to 4% for the first four months on sales up to $250,000 starting Friday, October 6
  • Current interest rate for savings and current account accounts: Will increase from 0.45% to 3.2% on sales up to $250,000 starting Friday, October 14.

NAB

Mortgage rate: The standard variable interest rate on NAB home loans will increase by 0.25% per annum from Friday, October 14.

Savings rate: NAB has not announced any increases to its savings or term deposit rates following yesterday’s RBA decision.

In a press release, NAB said its savings and term deposit rates “are continually under review” and that it raised rates last month.

Suncorp Bank

Mortgage rate: Suncorp Bank will increase variable rates on home loans by 0.25% per annum starting Friday, October 14.

Savings rate: Suncorp Bank has not announced any increases to its savings or term deposit rates following yesterday’s RBA decision.

In a press release, Suncorp said its rates “are under continuous review.”

Westpac Bank

Mortgage rate: Westpac Bank will increase its variable mortgage lending rates by 0.25% per annum from Tuesday, October 18.

Savings rate: Westpac announced interest rate increases for deposit accounts, including:

  • Westpac Life Total Variable Interest Rate: Will increase by 0.25% to 2.6% from Tuesday, October 18
  • Overall Westpac Life Spend&Save rate: Will increase by 0.25% to 3.75% from Tuesday, October 18
  • Westpac Electronic Conserver: The total variable interest rate for new customers will increase from 0.25% to 2.55% effective Tuesday, October 18.

Will rates go up again?

It’s very likely.

Here is what RBA Governor Phillip Lowe said after yesterday’s announcement:

“A further increase in inflation is expected over the next few months, before inflation then eases back towards the 2-3% range.

“The Bank’s central forecast is for consumer price index inflation to be around 7.75% in 2022, just above 4% in 2023 and around 3% in 2024.”

How much will rates go up?

Australian head of economics at Commonwealth Bank, Gareth Aird, estimates rates will rise 0.25 percentage points in November and again in December, taking the cash rate to 3.1%.

Westpac expects the cash rate to peak at 3.6% by February – but that’s the highest estimate from the big banks yet.

How will this impact my mortgage repayments?

RateCity says the average variable-rate homeowner could pay 6.36% interest by early next year.

Analysis by RateCity shows the average borrower with a $500,000 mortgage could be paying $687 more per month since rates started rising in May.

This is based on a homeowner’s principal and interest for 25 years remaining on their $500,000 mortgage.

For people with a mortgage of $750,000, this increase from May to October is $1,030 and it increases to $1,374 for people with a mortgage of $1 million.

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