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Swan slams 'selfish' CBA rate decision
Posted in Political News, Realestate and Home Loans, tagged "reluctantly", (CBA's), (RBA), additional, ALL news, another cut, ANZ, australia banks, Australia's, banking, biggest home lender, Bill Evans, brisbane, business, business confidence, business lunch, businesses, CBA rate decision, CBA's decision, Commonwealth Bank, consumer, cut, data, debt burden, decision, echoed, enjoying, executive, feigned, first home, first home buyers, first home owners grant, funding costs., furious, generous, government's huge, grant, growth in, higher, home, home and business loan rates, Home buyers, home lending, impact CBA's move., in 41 years, interest rates, investors, Joe Hockey, Kevin Rudd and Wayne Swan, labelling it selfish, lender, lending, lending rates., lifting its mortgage, low mortgage rates, lowest, lowest on the market., major banks, market economist, mortgage, National Australia Bank, nationwide, official rate, offset, opposition, outrage, owners, Political News, Prime Minister Kevin Rudd, Prominent, putting pressure, rates, record demand, reporters, Reserve Bank of Australia, retail banking services, Ross McEwan, selfish, sentiments, Sky News, small businesses, speech, spokesman, standard variable mortgage rate, statement., strongest interest, surprise decision, sustained, Swan slams, Sydney, sympathy, Treasurer, treasury, variable, Wayne Swan, Westpac, Westpac chief economist on June 13, 2009| Leave a Comment »
Treasurer Wayne Swan has taken aim at Australia's biggest home lender, labelling it selfish for lifting its mortgage and business lending rates.
Other banks have refused to rule out following the Commonwealth Bank of Australia's (CBA's) surprise decision to lift its home and business loan rates by 10 basis points to offset higher funding costs.
The opposition said the government's huge debt burden was putting pressure on interest rates, while a prominent market economist said it may force the Reserve Bank of Australia (RBA) to cut the official rate again to counter any impact from CBA's move.
CBA said it took Friday's decision "reluctantly", but at a standard variable mortgage rate of 5.74 per cent, up from 5.64 per cent, it was still the lowest on the market.
The rate hike will add $18 a month to repayments on a $300,000 home loan over 25 years.
The bank said it had absorbed as much of its additional funding costs for as long as it could.
"Unfortunately, we have seen the bank's wholesale funding costs remain high and continue to increase as previous long term funding matures and is replaced with new funding at significantly higher cost," CBA group executive of retail banking services Ross McEwan said in a statement.
Such reasoning drew no sympathy from the treasurer.
There are ups and downs when it comes to those decisions over time, but there are few decisions I can think of that are more selfish than this one," Mr Swan told reporters in Brisbane.
"I think Australians, rightly, will be furious with the Commonwealth Bank."
Prime Minister Kevin Rudd echoed those sentiments during a speech to a business lunch in Brisbane.
"We are all in this together – businesses, workers, government and the Reserve Bank – and today's decision by the Commonwealth Bank runs counter to this nationwide effort," Mr Rudd said.
The other three major banks – ANZ, National Australia Bank and Westpac – said their rates were constantly under review.
NAB said it had no current plans to raise its home loan rate but noted "all Australian banks" had been incurring significantly higher funding costs for some time.
Opposition treasury spokesman Joe Hockey said the government was putting pressure on interest rates by running up a huge debt.
"Kevin Rudd and Wayne Swan feigned outrage about this interest rate increase, yet they are directly responsible for it," Mr Hockey told reporters in Sydney.
"This is the beginning. You will end up with higher interest rates directly as a result of the spending binge of the Rudd government and the massive debt they are accruing."
Home buyers may be enjoying the lowest mortgage rates in 41 years, but have already missed out on about 30 to 40 basis points of the RBA's total 425 basis points of official rate cuts, with banks refusing to pass on the cuts in full because of the cost of funding.
For small businesses it has been even worse, being short changed by about 140 basis points.
The CBA's decision comes in a week that saw massive boosts to both consumer and business confidence, as well as data showing sustained growth in home lending – sucked in by low mortgage rates and a more generous first home owners grant.
April mortgage data showed loan demand has grown for seven straight months to a 14-month high, as well as record demand from first home buyers and the strongest interest from investors in nearly two years.
It also showed that the banks have cornered more than 92 per cent of all loans – a 33-year high.
Westpac chief economist Bill Evans said CBA's decision could well be countered by another cut by the RBA.
"If it does have an impact, particularly on confidence in the housing market, which has been the most encouraging source of recovery in the Australian economy, it may bring a rate cut back on the table at the Reserve Bank," Mr Evans told Sky News
Source : www.thedaily.com.au