Australia’s big four banks, which control about 85 per cent of the mortgage market, have wasted no time in matching the central bank’s interest rate rise with 25 basis point increases to variable home loan rates.

ANZ Banking Group Ltd was first off the mark after the Reserve Bank of Australia’s (RBA) announcement, saying in a statement on Tuesday that its standard variable home loan rate will rise to 6.31 per cent as of Monday November 9.

The Melbourne-based bank will also raise interest rates on a range of deposit products by 35 basis points and rates for credit cards and business lending will increase by 0.25 of a percentage point.

“Funding costs remain high and despite improvements in credit markets the average cost of wholesale funding is increasing which is continuing to place considerable pressure on mortgage margins,” ANZ chief executive for Australia Graham Hedges said in the statement.

“If sustained over time, there will be commercial pressure to pass the additional costs on.

“Right now, it’s in everyone’s interest that the recovery consolidates and the right thing to do at this point in the economic cycle is for us to absorb the additional funding costs.”

The RBA increased the overnight cash rate by 25 basis points to 3.50 per cent on Tuesday - the second increase in the space of a month - noting that economic conditions in Australia were stronger than expected.

ANZ was the first of the major banks to announce the change to its mortgage rate in October as well, after the RBA raised the cash rate.

Commonwealth Bank of Australia Ltd (CBA), the country’s biggest home loan lender, followed, increasing its variable home loan rate to 6.24 per cent as of Monday November 9.

CBA group head of retail banking services Ross McEwan said the bank’s wholesale funding costs remain high.

The Sydney-based bank also increased the interest rates on its the NetBank Saver and Business Online Saver deposit accounts by 25 basis points.

National Australia Bank Ltd (NAB) matched CBA for the lowest home loan rate at 6.24 per cent. Melbourne-based NAB’s increase will take effect on Friday November 6.

NAB said it will increase two deposit rate products by 25 basis points, also from Friday November 6, and a range of business loans and deposit rates by the same amount from Monday November 9.

Westpac Banking Corporation, the second biggest home loan lender, will increase its variable home loan rate to 6.31 per cent as of Friday November 6.

Sydney-based Westpac will also increase the rates on its credit cards and savings accounts by 25 basis points.

But Westpac said it would not be increasing its variable business lending rates.

“Although we continue to manage challenging funding conditions, I am pleased to announce that Westpac has made the decision not to raise our variable business lending rates for our small business customers,” Westpac group executive retail and business banking Peter Hanlon said.

Mr Hanlon said repayments on an average $250,000 mortgage would increase by about $40 a month.

Westpac’s subsidiary St George Bank also raised its standard variable rate by 25 basis points, to 6.29 per cent.

Regional lenders Bendigo and Adelaide Bank Ltd and Suncorp-Metway Ltd said interest rates were under review.

AAP