Australian Bank Industry begins to raise rates

The Australian bank industry is beginning to react to last week's official rate rise by the Reserve Bank of Australia, where the Reserve bank raised the rate by 0.25 basis points. The record low 3 per cent official rate now sits at 3.25 per cent and has been taken as a positive sign of the national economy's overall health.

In response to the Reserve Bank rate raise, Australian banks are beginning to raise their own with the big four being the very first to act while smaller banking institutions are waiting out to gauge reactions.

As it stands now, all four of the big four banks have raise their rates on their variable rate mortgages and loans by the same 25 per cent resulting in the following rates:

• ANZ bank - rate from 5.81 per cent to 6.06 per cent
• Westpac - also now sitting at 6.06 per cent
• Commonwealth Bank - rate now sitting at 5.99 per cent
• National Australia Bank - rate now at 5.99 per cent

While the big four banks in the Australian bank industry have announced their own rate rises, but the remaining bank industry institutions are holding back on announcing their own new rates attached with the majority expected to be announced over the next few days.

The federal government has warned Australian banks that they should not get carried away with the actions of the Reserve Bank and keep their own rates within a reasonable level.

Treasurer Wayne Swan stated of the impending rate rises that the Federal Government would not abide the banks using the recent rate rise as permission to hike rates too high.

''I can't see any justification for the four majors to further increase their rates over and above any decision that is taken by the Reserve Bank,'' Mr Swan said.

The government will also be encouraging mortgage market competition by introducing its residential mortgage-backed securities (RMBS) that is meant to assist smaller financial institutions in the mortgage market.

''Competition puts downward pressure on rates and it's very important that we have a competitive mortgage market,'' Mr Swan said.

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