Australia’s lenders will apply higher interest rates to variable mortgages in response to the Reserve Bank of Australia’s (RBA) decision to hike the cash rate to an 18-year high of 4.85 per cent on Tuesday.<\/p>\n
RBA governor Michele Bullock announced the cash rate was lifted to tackle persistent inflation in the Australian economy.<\/p>\n
“It is going to make people feel like it’s a recession because they feel poorer. Their spending can’t grow very quickly because their incomes aren’t growing very quickly,” Ms Bullock said.<\/p>\n
Set by the RBA, the cash rate is Australia’s official interest rate charged on unsecured overnight loans between banks.<\/p>\n
Put simply, it is how much it costs banks to borrow from each other.\u00a0<\/p>\n
When the RBA lifts the cash rate, it becomes more expensive for lenders to borrow from one another.<\/p>\n
Banks respond to RBA<\/p>\n
Macquarie Bank was the first to respond, telling customers it would raise interest rates across its variable-rate home loan products by 0.25 per cent within an hour of the RBA announcement, saying customers had until November 19 before the higher rate kicked in.<\/p>\n
The next day, the big four banks all announced they would lift interest rates on variable home loans by 0.25 per cent.<\/p>\n
“A 0.25 per cent per annum increase to variable home loan rates will increase monthly repayments by approximately $79 on a variable home loan of $500,000 for an owner occupier loan with principal and interest repayments,” ANZ said in a statement.<\/p>\n
Westpac, NAB, ANZ and CBA will apply the new rate from November 13.<\/p>\n
Westpac’s chief executive, consumer, Carolyn McCann said the majority of its customers were ahead in mortgage repayments.<\/p>\n
In statements, all of the banks said customers under financial strain should contact their bank as soon as possible.<\/p>\n
Boost for savers<\/p>\n
Those with money in the right savings accounts will enjoy earning more interest when banks lift their rates in the middle of the month.<\/p>\n