The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is down more than 1.5% as it increased its fixed interest rate.
What has happened to the ANZ interest rate?
According to reporting by the Australian Financial Review, ANZ is going to increase the fixed rate for owner occupiers that are paying principal and interest for their loans.
It relates to the four-year and five-year rates.
The ANZ four-year rate is going to increase from 2.24% to 2.49%. Meanwhile, the five-year fixed loan rate is going to rise from 2.24% to 2.69%.
ANZ isn’t the only bank to have done this. It follows increases by both Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA). I imagine it won’t be too long until there’s an adjustment from National Australia Bank Ltd (ASX: NAB).
According to the AFR, experts say the rises are likely to be tied to the conclusion of the Reserve Bank’s term funding facility in three weeks, which has led to almost $200 billion loaned to banks at a rate of just 0.1%
What to make of this
It should be expected that interest rates are going to rise. They are currently at emergency settings – it’s not going to be an emergency forever. Indeed, generally the economy has been booming in most sectors, with a few areas of difficulty still being felt.
Banks are here to make profit, so if their costs are going to go up then the interest rate they charge needs to go up too.
Economists and investors are now expecting interest rate rises to come a bit sooner than previously expected. A rising rate environment could mean more profit for banks, but it could also cause some impacts on the housing market.
Is the ANZ share price worth looking at?
ANZ shares have risen strongly over the last six months and 12 months. I don’t think it can sustainably grow much more unless the net interest margin (NIM) starts increasing, which would come with its own issues.
For me, it’s not one of the ASX dividend shares I’m looking at right now. I can’t see much profit growth after the initial recovery from COVID-19 provisions.
