Banks standoff over first rate rise with credit cards picked as first target

9 October 2009

Australian banks are being watched to see who will be the very first to respond to the latest action by the Reserve Bank of Australia. On Tuesday the Reserve Bank lifted interest rates from their lowest point of 3 per cent to 3.25 per cent with the banking industry now expected to follow suit and raise their own individual rates.

Pressure is on especially for the Commonwealth Bank and National Australia Bank to announce their plans for their own interest rates as they currently hold the lowest standard variable mortgage rates, both at 5.74 per cent, with many Australians holding loans with these major banks.

However, the banks have warned that they may indeed raise rates, and faster than the Reserve Bank has citing high funding costs that remain high. Despite this, the Federal Government has warned banks that they should not to raise rates by more than 0.25 per cent, with the banks generally wanting to keep the Government on their side after all the financial assistance the Government has provided throughout the Global Financial Crisis.

However, for rates attached to credit cards and business loans the range is far more open with consumers on their guard with banks moving to safeguard profit margins levels.

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