Westpac raises home loan rate in shock move

WESTPAC is raising its variable mortgage rates next month by 0.2 percentage points to 5.68 per cent with its rivals expected to follow their lead.

In a shock move, Westpac has today raised its variable home loan rate

IN a shock move, Westpac today said it was raising its variable mortgage rates next month by 0.2 percentage points to 5.68 per cent.

Australia’s second largest bank said the move was a response to rules introduced by the Australian Prudential Regulation Authority requiring banks to hold more capital to absorb possible losses and make the businesses more secure.

The bank’s owner occupier home loan variable rates will increase by 0.20 percentage points to 5.68 per cent on November 20, when residential investment property loan rates will go up by the same amount to 5.95 per cent.

Fixed rate mortgages will remain unchanged.

“While Westpac is well placed to meet these changes, a significant increase in capital ultimately increases the cost of providing home loans to customers,” Westpac consumer bank chief executive George Frazis said.

“This is a difficult decision and one that is not taken lightly.

“We acknowledge that it does impact customers, even in an environment where interest rates remain near historic lows.”

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In some good news for customers, Westpac also raised its interest rate for new savers on four-, seven- and 12-month term deposits by 0.25 percentage points from Friday.

“We have sought to carefully balance the needs of our borrowers, depositors and our shareholders,” Mr Frazis said.

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Westpac announced the changes as it unveiled plans to raise another $3.5 billion in a rights entitlement offering in order to bolster their home loan books.

The move comes after it raised $2 billion in May and $1.32 billion in August.

In August, ANZ announced a $3 billion raising while CBA opted for $5 billion. NAB raised $5.5 billion in May.

All the big banks have lifted lending rates for property investors, but Westpac is the first to hike owner-occupier loans.