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.
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The Reserve Bank of Australia (RBA) raised interest rates as expected on Tuesday, but the bank’s fight with inflation in the future will see further tightening of monetary policy, economists say.

The RBA on Tuesday lifted the overnight cash rate by 25 basis points to 3.50 per cent.

Financial markets had priced a 25 basis point rise at short odds on Melbourne Cup day.

The rise made a quadrella of November rate movements by the central bank after 25 basis point hikes in 2006 and 2007 followed by a 75 basis point cut last year.

RBA governor Glenn Stevens said the era of low interest rates had passed as the local economy continued to improve.
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