Australia and New Zealand Banking Group, Australia's fourth-largest bank, said on Friday it has raised mortgage rates, citing continued pressures on wholesale funding and cost of deposits.
The move, which was by and large unexpected after Australia's central bank kept rates on hold at this month's meeting, may provide a catalyst for rival banks follow suit.
ANZ said in a statement it raised its standard variable mortgage rate by 0.06 percent per annum, to 7.42 percent, the second-highest of the country's big four banks. National Australia Bank has the lowest rate of 7.31 percent.
Movements in mortgage rates have a big economic impact in Australia where more than 90 percent of all home loans are variable. More than a third of Australia's 8.5 million households have a mortgage.
For an average mortgage of $280,000, the 0.06 percent increase will add $3.25 per week to the loan, ANZ said. The rate hike is effective April 20.
The bank said increased competition for deposits, particularly term deposits, were the most significant driver of rising funding costs and added that while wholesale funding costs have eased slightly, pressures were continuing.
"Given this and the volatility we have seen in wholesale funding markets, we wanted to ensure these costs were sustained before we acted to pass them on," ANZ Australia CEO Philip Chronican said in the statement.
"We also wanted to pace increases in a way that was manageable for our customers and ensured we were competitively positioned," he said.
Australia's central bank seems certain to cut interest rates in May, a Reuters poll found, having already flagged that it would do so if consumer inflation data due later in the month confirmed subdued price pressures.
In a Reuters survey, 16 out of 17 economists expect the Reserve Bank of Australia to cut its cash rate by 25 basis points to 4.0 percent at its May 1 meeting, which will place pressure on banks to pass on some of the cut, if not all.
