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Interest RatesThree of the nation’s major banks have yet to announce their decisions on lending rates, leaving many homeowners worried whether they face the same fate as Commonwealth Bank (CBA) customers.

CBA jacked up its variable mortgage rate by 45 basis points on Tuesday, well beyond the Reserve Bank’s 25 basis point increase, sparking a storm of protest.

ANZ, National Australia Bank and Westpac have their lending rates under review after the central bank’s first rate increase since May.

Westpac chief executive Gail Kelly, announcing an 84 per cent jump in annual profits to $6.3 billion on Wednesday, said her bank will announce their rate decision in the next few days.

Mrs Kelly said rates decisions were never taken lightly by the bank’s board, which will be little comfort to her customers if they match CBA’s increase, and whose borrowers face around a $90 increase on their monthly loan repayments for an average $300,000 mortgage.

A still fuming Treasurer Wayne Swan said the government will release measures next month to curb the “arrogance” of the banks, including increasing the powers of the competition watchdog, the Australian Competition and Consumer Commission (ACCC).

“Clearly, (the big banks) have behaved in an arrogant fashion and, clearly, what we will do is make the system more competitive, to give more powers to the ACCC and put in place a range of further reforms to keep them honest,” he told reporters in Sydney.

He said this would be “enduring reform”, not like opposition treasury spokesman Joe Hockey’s “thought bubble”, referring to the opposition’s nine-point plan announced last week.

Mr Hockey said Mr Swan’s response to the banks was a “joke”, adding that if the treasurer had been working on his reforms for months he should release them now, rather than waiting another month.

“The government can huff and puff all it wants with the banks but the bottom line is the banks are treating the government with the same contempt as the Australian people are treating the government,” Mr Hockey told reporters in Sydney.

As the debate raged, new data showed home building was still suffering under previous rate increases, and despite the Reserve Bank having been on the sidelines since May.

Building approvals tumbled 6.6 per cent in September and some 30 per cent over the past six months, a trend that is likely to continue following this latest rate increase.

Australian Bureau of Statistics data shows that between October 2009 and May 2010, a period of six rate increases, just 12,143 homes were approved, the smallest number in over a year.

TD Securities strategist Annette Beacher said the Reserve Bank’s “surprise” increase in the cash rate to 4.75 per cent was never about the housing sector, and barely got a mention in governor Glenn Stevens’ post-meeting statement.

“It was always the case that complete withdrawal of monetary and fiscal policy stimulus would dampen the housing cycle into 2010/11, and this housing downturn is unlikely to sway the RBA from hiking another 100 basis points over the next 12 months,” she said.

The shrinkage in housing construction could cushion house prices, as housing supply is again likely to prove to be insufficient to match demand, she said.

Story Colin Brinsden www.smh.com.au © 2010 AAP

Tags: banks, economy, finance, interest rates, investment, money, property, research

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