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Effective from 19 September, Westpac will increase rates on all of its variable home loan products by 14 basis points, making it the first major bank to lift rates following several increases from non-major lenders over the last few months.
Westpac’s rate changes are as follows:
- Standard variable home loan rate for owner-occupiers will increase to 5.38 per cent per annum for customers with principal and interest repayments
- Standard variable home loan rate for owner-occupiers will increase to 5.97 per cent per annum for customers with interest-only repayments
- Standard variable residential investment property loan rate will increase to 5.93 per cent per annum for customers with principal and interest repayments
- Standard variable residential investment property loan rate will increase to 6.44 per cent per annum for customers with interest-only repayments
George Frazis, Westpac’s chief executive, consumer bank, said in a statement that the decision was largely influenced by a rise in wholesale funding costs.
“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.
“Wholesale funding is an important component in our mortgage pricing. In particular, the bank bill swap rate, which is a key wholesale funding rate for mortgages, increased by about 25 basis points between February and March this year and has remained elevated.”
Mr Frazis added that despite initially expecting funding pressures to ease, the bank now expects such pressures to persist in the longer term.
“We initially hoped that this increase would be temporary, and therefore we have incurred these costs over the last six months. The rate changes announced today will not recover these costs,” the chief executive said.
“We now believe wholesale funding costs will remain high for the foreseeable future.
“Given the step change in our funding costs, we have made what we believe is the appropriate decision: to balance the interests of all of our stakeholders by remaining both unquestionably strong and competitive in the market.”
Westpac, along with Commonwealth Bank and NAB, has also recently reported increased pressures on its net interest margin.
Westpac also noted that the 14 basis point increase would add $35 to the interest cost per month of an average home loan of $300,000, and claimed that 68 per cent of Westpac Group home loan customers are ahead on their repayments.