Commonwealth Bank next to raise interest rates while NAB stays with RBA

Thursday December 17, 2009

Commonwealth Bank has followed in Westpac's footsteps and raised it interest rates above the Reserve Bank of Australia, although not to the extent of the 45 basis points increase by Westpac.

Commonwealth Bank announced today to the banks industry that it will raise its standard variable home loan rate by 37 basis points, thereby taking it from 6.24 per cent to 6.61 per cent.

The new variable home loan interest rates will be effective for new and existing customers from 9 December.
Group Executive, Retail Banking Services Ross McEwan said, "While the change in the official cash rate has partly contributed to this interest rate increase, the sustained increase in wholesale funding costs that we are experiencing has also been a major factor.

"Wholesale funding costs continue to remain at record highs and, as cheaper funding expires and is replaced with more expensive funding, the overall cost of our funds has increased".

"In the market for deposits, there is also intense competition amongst the banks. As wholesale funding costs remain high we are also increasing our deposit interest rates.

"This is good news for many of our customers who have been experiencing near historic low returns on their investments as banks have navigated through the global crisis.

"In balancing the needs of all our customer segments we are also committed to continuing to strongly support our business customers. At 7.11 per cent per annum, our residentially secured business lending rate remains the lowest of the major banks," Mr McEwan said.

In a surprising and strategic move, National Australia Bank announced yesterday that it will remain steady with the Reserve Bank of Australia and only raise its own standard variable home loan rate by the allocated 25 basis points. The action by the National Australia Bank was addressed by the banks head of personal banking, Lisa Gray, who stated that NAB wanted to "change the banking game".

"We are determined to be competitive, to offer our customers a better deal and attract new customers to NAB. Today we are sending a message to customers at Westpac, and the other banks, that NAB can offer them a better deal," Ms Gray said.

"While we are monitoring the increase in funding costs, we will continue to absorb these in the short term but will maintain our focus on making responsible business decisions," Ms Gray said.

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