Banks to lift rates

Published in The Advertiser, January 2008 by Martin Waters

Major banks are set to raise their rates in line with the National Australia Bank in a worrying move for households after recent petrol price hikes.

The big banks were expected to follow the NAB’s move to counter the global credit crunch, analysts predicted yesterday, in a further squeeze on consumers.

And another rate rise from the Reserve Bank of Australia could come as soon as March. Yesterday NAB upped its variable rate by 0.12 per cent which worked out to about $4.60 more a week on a $200,000 home loan.

The bank said it introduced the rise to ‘‘balance needs of customers and shareholders’’ amid the global credit situation— despite posting a record $4.6 billion annual
profit last year.

Geelong financial adviser Dale Gillham said the other big banks would definitely follow the NAB’s lead.

‘‘There is no doubt in my mind because the money market is really, really tight at the moment and none of the banks are lending to each other,’’ Mr Gillham said.

He said consumers’ unbridled enthusiasm for spending and credit, seen during the Christmas leadup, could prompt the Reserve Bank to raise interest rates by March.

But the Wealth Within executive director said Australians were still spending more than they were saving despite the string of rate rises and crude oil breaching the landmark US$100 a barrel.

‘‘Obviously this is going to affect defaults and there is a wider gap happening with the rich getting richer and the poor getting worse than they’ve ever been,’’ he said.

Mr Gillham predicted shoppers’ love affair with credit to result in an Australian recession before 2010.

Yesterday, Mortgage and Finance Association of Australia CEO Phil Naylor urged borrowers to talk to their lender or broker before changing their loan.

‘‘Moving to a fixed rate may seem like the most obvious option, but it may not be the best move for your situation,’’ he said.

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