Lender’s fresh blow to mortgage holders

Another major lender has announced it will increase its mortgage rates following the Reserve Bank’s decision to raise the official cash rate for the 11th time in a year.

AMP Bank has joined Westpac in announcing the hike.

“Following the Reserve Bank of Australia’s decision to increase the official cash rate by 0.25 per cent, AMP Bank has announced interest rate changes for customers,” the lender said.

“The interest rates for variable rate home loans will increase by 0.25 per cent per annum (pa) effective 9 June 2023 for new customers and 12 June 2023 for existing customers.”

AMP Bank said it would also apply the rate increase to saving products – AMP Notice products will increase by 0.25 per cent effective June 13, 2023, as will cash account rates offered by AMP Bank to investment clients and superannuation members.

“In addition, AMP Bank will be offering highly competitive rates on a range of term deposit products effective 13 June 2023,” the lender said

On Tuesday, Westpac was the first of the four big banks to pass on the RBA’s latest interest rate rise announced just hours earlier.

The variable rate changes to home loans will come into effect from Tuesday, June 20, but Westpac made no mention on passing the rate increase on to any of its savings products.

The central bank hiked the cash rate by 0.25 percentage points to 4.10 per cent – the highest level since April 2012 – when it met on Tuesday, with a warning there could be more hikes on the way.

It means the average borrower with a $500,000 home loan before the RBA began its aggressive tightening cycle last May could now be paying $1134, or 49 per cent, more a month.

In a statement released after the rate hike announcement, RBA Governor Philip Lowe indicated further interest rate rises could be required in the coming months.

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend upon how the economy and inflation evolve,” he said.

Since May 2022, the RBA has aggressively raised rates from a record low 0.1 per cent in a bid to tame runaway inflation.

Monthly figures released by the ABS last week show the annual inflation rate jumped from 6.3 per cent to 6.8 per cent in April. The next set of quarterly data isn’t due until next month.

But inflation remains well above the bank’s target range of two to three per cent.

Dr Lowe said Tuesday’s rate hike would “provide greater confidence” that inflation will return to target “within a reasonable time frame”.

“Inflation in Australia has passed its peak, but at 7 per cent is still too high and it will be some time yet before it is back in the target range,” he said.

“The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”

Treasurer Jim Chalmers was quick to brush aside suggestion a push for higher wages and the recent federal budget was behind the shock rate call.

“I do expect that there’ll be a lot of Australians who will find this decision difficult to understand and difficult to cop,” he told reporters in Canberra on Tuesday.

“(The RBA have) also made it clear that they don’t see a wage price spiral in the economy so this rate rise today is not because of the budget and it’s not because people on the minimum wage are being paid too much.”