WESTPAC has become the first of the Big Four banks to increase interest rates for all homeowners in a “tough decision” that’s set to add $35 more to the average monthly mortgage repayment.
The move was likely to be followed by other lenders and comes a week out from the Reserve Bank’s monthly monetary policy meeting on Tuesday — a fresh sign that lenders were prepared to move on rates out of cycle to the RBA.
Westpac announced it would raise its variable interest rates for both owner occupied and investment properties effective September 19 when all variable mortgage rates would increase by 14 basis points.
The measure applies to all new and existing customers, with those making interest only payments penalised with higher charges — regardless of whether they were owner occupiers or investors. The bank will allow those on interest only repayments to shift to principal and interest “without any penalty or fee”.
Owner occupiers who made both principal and interest repayments would see their standard variable home loan rate rise to 5.38 per cent, while those who with interest only repayments would rise to 5.97 per cent.
The standard variable residential investment property loan rate rises to 5.93 per cent on September 19 for those making principal and interest repayments — which is lower than the charge for owner occupiers making interest only repayments.
Investors making interest only repayments would see their standard variable rate rise to 6.44 per cent.
George Frazis, Westpac’s chief executive — consumer bank, said the move came because of increased funding costs for the bank — but the rates were still 10 basis points below where they were three years ago.
“This is a tough decision but we have a responsibility to price our mortgage products in a way that reflects the reality of our funding costs,” he said in a statement.
The 14 basis point increase would increase the average $300,000 home loan interest cost by $35 more a month, the bank said.
It added that about 68 per cent of Westpac’s home loan customers were currently ahead on their repayments.