Were you busy watching the Melbourne Cup this afternoon? Perhaps even participating in a few Cup-related festivities? Even over here in Perth, most people I know were enjoying a Melbourne Cup lunch – the 3pm race in Victoria means it runs at midday here – and certainly nobody else I know was paying any attention to what the Reserve Bank or the big four banks were up to.
And no doubt (I think!) that’s one of the main reasons why the banks are already passing on the Reserve Bank’s rate rise, with so far the Commonwealth Bank at least being “cheeky” enough to nearly double the rise compared to the cash rate increase.
Yes, the Reserve Bank met today, as they always do on the first Tuesday in the month, and of course that means every November their meeting coincides with the Melbourne Cup. Last year, too, they raised the cash rate on Melbourne Cup day, and this year they also decided to hike it by 25 basis points. This was not entirely unexpected though most money (the money that wasn’t on the Cup, that is!) was on them holding steady on the cash rate for a little while longer due to global uncertainty.
With the Reserve Bank raising the cash rate to 4.75 per cent, it is an easy excuse for the lending banks to start increasing the interest rates they charge us. Very quickly, the Commonwealth Bank hopped on board (yes, while you were still at your Melbourne Cup event!) and increased their variable interest rates by 0.45 per cent – almost double the 0.25 per cent jump the Reserve Bank cash rate made. The big four banks have long been complaining that their funding costs have increased dramatically and they have been holding back on raising rates “for as long as they can”.
At the moment, other banks have not yet announced rate rises, but it is probably inevitable – the only question is whether they stick with a 0.25 per cent raise or try to get even more out of us.