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Reserve Bank increases the cash rate

2 March 2010

Reserve Bank raises cash rate by 0.25%
11 out of 16 economists predicted it
But what will mortgage lenders do?

The Reserve Bank of Australia has raised the official cash rate yet another 0.25%, to 4.00%.

Eleven out of 16 economists can't be wrong! A survey by AAP last week found that two thirds of economists surveyed tipped a rate rise today. However after last month's surprise stand-off by the Reserve Bank it couldn't have gone any other way. This is the picture that the Reserve Bank governor Glenn Stevens painted in a recent speech given to the Standing Committee on Economics. With unemployment being at a 9 month low, the inflation rate sitting nicely within the RBA's target range, and the economy continuing to recover from the recent downturn, we should see some consistent interest rate increases by the Reserve Bank over the next year which will then hopefully plateau by mid 2011.

Mortgage lender	Old rate	New rate	How much passed on?	Naughty or nice?
AMP	6.69%	6.94%	0.25%
ANZ	6.66%	6.91%	0.25%
Aussie	6.44%	tba	tba	tba
Bank of Queensland	6.76%	tba	tba	tba
BankWest	6.55%	6.80%	0.25%
Bendigo Bank	6.70%	tba	tba	tba
Citibank	6.88%	tba	tba	tba
Commonwealth Bank	6.61%	6.86%	0.25%
CUA	6.37%	tba	tba	tba
Homestar	5.88%	tba	tba	tba
HSBC	6.49%	6.84%	0.25%
ING Direct	5.94%	6.19%	0.25%
ME Bank	6.69%	tba	tba	tba
MyRate.com.au	5.88%	tba	tba	tba
NAB	6.49%	6.74%	0.25%
RAMS	6.48%	tba	tba	tba
St George	6.68%	6.93%	0.25%
State Custodians	5.64%	tba	tba	tba
Suncorp	6.69%	6.94%	0.25%
Westpac	6.76%	7.01%	0.25%

Will the banks be making smoothies this month?

So the RBA increased rates by 0.25% this month, but what will the Big 4 banks do? After the Westpac debacle in December, it will be unlikely that any bank will increase their rates by more than 0.25% but you can be sure that most if not all will be increasing their rates by the maximum. Last month we heard that some of the Big 4 were going to keep their interest rates where they were even if the RBA raised them.

Mozo’s crystal ball says that all the banks will be hoping to hold off their announcements as long as possible, but that one of them (most likely NAB) will jump out and announce an increase to match the RBA’s 0.25% increase. There will follow a long silence, while all the banks that had considered a bigger increase wait until our attention has moved on to something else – Saint Patrick's Day, Peter Garrett, Easter. There’ll be lots of 0.25% increases, a few greater than that, and none less than that. Let’s see how good our crystal ball is!

Mozo will keep you informed

But whatever the banks do, and however quick or slow they are in making announcements, Mozo has a team on the case, chasing down the rates as they happen. In fact, we often have them before they happen – showing home loan rate changes that have been announced even before they come into effect.

How much will your home loan repayments change? Try Mozo's free online rate change calculator.

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