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Interest rates for ANZ Banking Group's home and business loans have remained on hold after the bank's inaugural monthly rate review meeting.
The bank's pricing committee made the decision on Friday at what will become a regular monthly event in an attempt to separate ANZ's decisions on rates from those made by the Reserve Bank of Australia (RBA).
ANZ's chief executive for local operations Philip Chronican said it was prudent to leave the bank's variable interest rates on hold given its competitive position, the subdued state of credit demand and the state of Australia's economy.
But he flagged ANZ's higher funding costs would remain so in the near term, raising the possibility that rates could rise in the future.
"In coming to our decision this month we wanted to be clear that these higher interest rates we are now paying our depositors and the elevated prices we are required to pay for wholesale funds are going to be sustained given the volatility we saw late last year," Mr Chronican said.
ANZ is no longer announcing its interest rate movements in lock-step with the RBA.
The move is designed to change the public's perception that ANZ's loan rates, and cost of funds, are tied to the RBA's official cash rate.
ANZ will announce whether it is lifting or cutting interest rates on the second Friday of each month.
Any changes to its variable interest rates will come into effect one week after its monthly announcement.
"We want the process of setting interest rates for our customers to be simple and transparent," Mr Chronican said.
His comments came three days after ANZ raised one billion euros ($A1.24 billion) from an issue of covered bonds into the European debt market, paying about 130 basis points over the mid-swap rate to secure the sale to investors.
Covered bonds are debt securities backed by cash flows from mortgages or public sector loans.
Banks are paying higher spreads to ensure they secure funds from volatile offshore credit markets, Bell Potter Securities' analyst TS Lim said.
"They're accepting whatever price there is in the market - they're trading off price for certainty."
Standard variable rates on home loans currently stand at 7.36 per cent at Westpac, 7.31 per cent at CBA, 7.30 per cent at ANZ, and 7.22 per cent at National Australia Bank.
ANZ currently charges small businesses a variable reference rate of 10.74 per cent.
The bank's shares closed 10 cents higher at $21.20.
Based on information provided by and with the permission of the Western Australian Land Information Authority (2013) trading as Landgate.