Interest rates to remain or be lifted?
Pre-empting any public backlash against raising interest rates, the National Bank of Australia Limited (NAB) said yesterday it would not lift mortgage rates by any more than that announced by the Reserve Bank of Australia in this afternoon's RBA board meeting.
While opinions are divided on whether or not the RBA will lift rates today, NAB’s announcement was a clear challenge to the remaining three major lenders.
Only a matter of weeks ago Westpac indicated it was under pressure to pass on an interest rate rise that would surpass that of the RBA.
This raises the question of how customers will react and whether the NAB’s strategy of increasing customer numbers will work?
While no other bank has promised to match the RBA’s potential rate increase, it would be a brave company to lift rates by more than the official rate despite the fact rates have been at historically low levels recently.
Popular consensus was that the RBA would lift rates by 25 basis points until last Wednesday when the Australian Bureau of Statistics reported a 1.4% fall in retail sales in February and a 3.3% drop in the number of dwelling units approved in February.
Both figures fell short of estimates with economists expecting a 0.3% rise in retail sales for the month and a rise in excess of 2% in building approvals nationally.
The declines were largely attributed to four official interest rate hikes since October as households cut spending. During this period banks have exceeded the rate hikes announced by the RBA on occasions, with Westpac in particular coming under heavy criticism.
However, rises in Australian commodity exports and positive data out of the US has some still confident of a rate hike.
RBA governor Glenn Stevens’ rare appearance on commercial television last week warning of the high levels of borrowing involved in property investment over the past 12-months was also viewed as an indication the official interest rate would be increased.
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