Rate hikes: Other banks to join Westpac’s home loan cash grab
INDUSTRY experts expect the Commonwealth Bank, National Australia Bank and ANZ to follow Westpac’s lead and hike interest rates by week’s end, slugging millions of Australians as they make billions of dollars in profits.
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MILLIONS of Australians are bracing for a home loan repayment shock after Westpac hiked interest rates on Wednesday.
It is the first of the big four to raise all variable home loan rates this year, lifting them by 0.14 percentage points.
A household with a $300,000 30-year loan must now find an extra $26 a month or more than $300 a year.
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Industry experts expect the other big three — the Commonwealth Bank, National Australia Bank and ANZ — to follow suit by week’s end.
Treasurer Josh Frydenberg said Westpac must explain “to the Australian people” why they would face higher costs.
The big banks had been delaying a rates rise, particularly since the banking royal commission began earlier this year and damning evidence of misbehaviour began to emerge.
Westpac chief executive officers Brian Hartzer told the Herald Sun: “We agonise over this, but the cost of funding has gone up considerably.”
Mr Hartzer said the rate rise was “the responsible thing to do”, given increasing funding pressures.
Westpac, the nation’s biggest mortgage lender to property investors, made a $7.99 billion profit in the year to last September. Mr Hartzer’s pay and perks were worth $6.68 million.
Many smaller lenders have already made similar changes to their interest rates, increasing their variable deals by up to 0.15 percentage points.
Experts said as smaller lenders upped rates, citing rising borrowing costs, it was just a matter of time before the big four followed.
Westpac’s standard variable home loan rate for owner occupiers will climb 0.14 percentage points to 5.38 per cent. Discount rates will rise the same amount.
Investors with an interest-only loan will also be hit by the increase, taking their rate to 6.44 per cent.
Westpac has a high share of interest-only loans.
Westpac subsidiary the Bank of Melbourne will also increase its variable rates by 0.14 percentage points.
The changes will take effect on September 19.
The chief executive of Westpac’s consumer banking division, George Frazis, said rates were unlikely to come down in the short term.
“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. We now believe wholesale funding costs will remain high for the foreseeable future,” he said.
Home Loan Experts’ managing director Otto Dargan said it was “almost certain” the other big banks would move: “They’ve all seen an increase in their costs due to an increase in the cost of offshore funding and extra compliance expenses.
“They’ve all delayed passing this on to their customers because of the public scrutiny due to the royal commission, but inevitably they weren’t going to hold out forever.”
Just last week Reserve Bank governor Philip Lowe warned borrowers rate rises were imminent and they should not rely on their properties appreciating.
Shadow treasurer Chris Bowen said Westpac had to “justify” its move.
“Australians are already doing it tough … and this won’t help,” he said.
The RBA board has held the cash rate at 1.5 per cent for the past two years.
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