Most mortgage lenders exceed official cash rate moves

As speculation about next month's Reserve Bank board meeting heightens, the latest home loan rate figures show that most lenders took advantage of Westpac's lead and added a substantial margin to the central bank's 25 basis point increase in December.

While Westpac still stands out for having made the biggest increase in its standard variable mortgage rate in December (45 basis points) and the biggest increase (95 basis points) over the three months from October 2009, when the Reserve Bank increased rates by a total of 75 basis points, plenty of other lenders came close.

Westpac chief executive Gail Kelly must be wondering when some other head of a financial institution is going to cop some of the flak.

Of the 74 lenders in the InfoChoice database, all but five have now moved their standard variable mortgage rates in response to the change in official cash rates in December.

Four others joined Westpac in raising their rates by 40 basis points or more and 36 put their rates up by between 35 and 39 basis points.

Only 18 held their rate increase to the level of the 25 basis point official cash rate move.

It will be interesting to see in the next round if lenders think they have now broken the nexus between official cash rate movements and their own rate changes.

Over the three months to December, 49 lenders made overall rate increases that were higher than the 75 basis points of increase in the official cash rate.

Six lenders followed Westpac's lead by raising rates by 90 basis points or more over the period. They were AIMS Home Loans, Big Sky Credit Union, Community First Credit Union, Queensland Teachers Credit Union, Reduce Home Loans and Transcomm Credit Union.

Only 17 lenders have followed the movement of the official cash rate and increased rates by 75 basis points overall. Only one of them, National Australia Bank, is a major lender.

It will also be interesting to see how the RBA board takes these changes into consideration in its deliberations over the next months and to what extent it feels that lenders are doing its work for it and reducing the pressure for another official cash rate increase.