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ANZ lifts variable rate to 7.36 per cent
Released 10 February 2012

ANZ bank has made the surprise move of increasing its variable mortgages and small business loans by 0.06 per cent to 7.36 per cent.      

On Tuesday (7 February 2012) the Reserve Bank of Australia decided to leave rates on hold at 4.25 per cent, after cutting rates 25 basis points at its meetings in November and December.

ANZ, announced last year it would make its interest rate decisions independently of the RBA, on the second Friday of each month, following the RBA’s meetings which are held the first Tuesday of the month.

ANZ CEO Australia Philip Chronican said "this month we faced a serious dilemma in our review, balancing the rising cost of bank funding including deposit customers’ interests in receiving highly competitive rates, and the expectation of borrowers that we keep lending rates as low as possible.

“In December and January we absorbed the additional funding costs in the hope that funding pressures would ease and that no change in lending rates would be necessary. However, margins in retail and business banking have now been squeezed for a number of months and we’ve taken the difficult decision to pass on part of the higher costs to customers while we also get on with taking action to reshape the bank for tougher times."

He said the new monthly interest rate review process recognises that the Reserve Bank’s cash rate alone is not an accurate reflection of bank funding costs, particularly since the global financial crisis which has left all banks with the task of raising funds in volatile global markets and through stronger competition for deposits.

“This change comes with a duty to explain to our customers what drives our decisions and provide greater transparency about our funding costs."

The other big four banks have indicated they will not follow the ANZ’s lead in making separate interest rate announcements at this stage. Westpac's standard variable rate currently stands at 7.36 per cent, CBA's at 7.31 per cent compared with NAB's at 7.22 per cent.

ANZ also chose to cut its 3-year fixed rates by 0.15 percent to 5.99 per cent. In comparison, Westpac's 3-year fixed rate is 6.19 per cent, NAB's is 6.24 per cent and CBA is the highest at 6.33 per cent.

ANZ’s new interest rates are effective from 17 February 2012.