Westpac rate rise will rake in an extra $1.4 million a day in interest charges

IN an ominous sign for borrowers, Suncorp has jacked up its interest rates just two days after Westpac did the same thing — and by an even greater amount.

LENDER Suncorp has hiked interest rates just two days after big bank Westpac also jacked up their charges.

The Queensland-based lender revealed today it would slug customers with on all variable rate loans by an extra 0.17 percentage points.

This is the second hike by the bank this year on variable rate deals and will lift their standard variable rate for owner occupier principal and interest customers to 5.77 per cent.

They lifted variable rates by 5 basis points in March.

The bank’s chief executive officer of banking and wealth David Carter said the hike was due to increases to funding costs.

Small business loans will also increase by 0.1 percentage points.

The moves begin on September 14.

Financial comparison website RateCity’s spokeswoman Sally Tindall said Suncorp’s decision was “to hikes rates twice in one year is a hard pill to swallow for their customers.”

“The bank was one of the first to hike out-of-cycle in March, increasing rates for owner-occupiers paying principal and interest by five basis points,” she said.

“Today those same customers have had their rates hiked by an additional 0.17 basis points.

“This could be the last straw for some of Suncorp home loan customers, who’ve just worn the brunt of a double rate hike in less than six months.”

Smaller lender Adelaide Bank also revealed today they were hiking variable interest rates ranging from 0.12 percentage points to 0.4 percentage points.

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Home loan customers should expect to see more rate rises in the coming weeks as all eyes remain on the other big three banks. Picture: Getty Images

Westpac is set to rake in an extra $1.4 million a day in interest charges by pushing up their home loan interest rates by 0.14 percentage points across owner occupier and investor variable loans.

The jump will slug mortgage customers with a $300,000 30-year home loan an additional $26 a month.

New analysis by financial comparison website Mozo found based on Westpac’s loan book the hike will deliver them an estimated $43 million per month in interest earnings or more than $516 million per year.

But all eyes remain on the other remaining big financial institutions — the Commonwealth Bank, ANZ and National Australia Bank — as to if and when they will also jack up rates.

HSBC chief economist Paul Bloxham said borrowers should be prepared for more “home loan rates are more likely to rise than fall.”

“The moves we are seeing by the banks are still quite small,” he said.

“We think the Reserve Bank of Australia could be lifting their cash rate by the middle of next year.”

Wholesale funding costs have been blamed for banks lifting variable rates, which has included recent moves by smaller lenders such as AMP, Bendigo Bank, Bank of Queensland, ING, ME, Suncorp and Citi.

Westpac increased its investor and owner-occupier variable home loan rates by 0.14 percentage points. Picture: Hollie Adams

The RBA has kept the cash rate on hold at 1.5 per cent since August 2016, but governor Philip Lowe last week warned borrowers rate rises were on the horizon.

He also said borrowers should not expect the value of their home today to increase tomorrow.

The RBA board meets again next week and it’s expected the cash rate will again stay on hold.

Mozo spokeswoman Kirsty Lamont said while Westpac is the “first to crack” of the Big Four and hike rates we could see the others shortly follow suit.

“Westpac’s decision to pass on the cost to mortgage customers is a very profitable one with the lender pocketing over a million dollars a day in extra interest charges,” she said.

“The Reserve Bank is expected to shelve any ideas of moving the cash rate upwards for the foreseeable future.”

Once Westpac’s latest hike kicks in on September 19 their standard variable rate — the benchmark interest rate — will be the highest of the Big Four banks at 5.38 per cent.

It is followed by NAB at 5.24 per cent, CBA at 5.22 per cent and ANZ at 5.2 per cent.

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