Westpac increases its home loan variable interest rates for a second time

A major Australian bank has announced hikes to its interest rates for the second time in the space of a month.

Westpac has increased its home loan variable interest rates for the second time in the space of a month.

On Wednesday, Westpac’s mortgage rates for new and existing customers went up by 0.50 percentage points.

It comes after it raised home loan variable interest rates by the same amount for new and existing customers on June 21.

Australia’s second largest home loan lender also hiked its fixed home rates by up to 0.60 percentage points for both owner-occupiers and investors on all fixed rate terms.

One to three-year rates for owner-occupiers paying principal and interest on their loan have increased by 0.50 percentage points, while the rate spiked by 0.60 percentage points for four to five-year rates.

Westpac has hiked its fixed home rates by up to 0.60 percentage points for both owner-occupiers and investors. Picture: NCA NewsWire / John Gass

It is the second time in the space of a month Westpac has made changes after it increased home loan variable interest rates by 0.50 percentage points for new and existing customers on June 21.

RateCity research director Sally Tindall said fixed mortgage rates starting with a five or six were the “new norm” from the big four banks.

She also said the “ultra-low” interest rates of under 2 per cent were now a “distant memory”.

“It’s hard to believe that just a year ago Westpac was offering a 2-year fixed rate of 1.89 per cent for owner-occupiers. Now that rate has almost tripled, to 5.39 per cent,” Ms Tindall said.

RateCity research director Sally Tindall said fixed mortgage rates starting with a five or six were the ‘new norm’. Picture: Supplied

Westpac chief executive of consumer and business banking Chris de Bruin said the bank understood that some customers might find these changes “challenging”

“We considered several factors in making this decision including the 0.50 per cent rise in the official cash rate and ongoing increases in the cost of funding as well as the needs of both borrowers and depositors,” he said.

“We know that some customers will be reassessing their household budgets as home loan interest rates rise.

“While the majority of our home-loan customers are ahead on repayments and in a good position to adapt to interest rate changes, some may find it more challenging.”

Despite the hikes, Westpac’s rates are still the lowest among the four major banks.

The bank will also increase the standard variable base rate for Westpac Life savings customers by 0.50 percentage points from July 22, bringing the total variable interest rate to 1.35 per cent per annum.

Westpac acknowledged the changes could be ‘challenging’ for some customers. Picture: NCA NewsWire / Christian Gilles

It comes as ANZ warned that Australian borrowers were facing four more massive rate hikes over the next four months, which will take the official cash rate above 3 per cent before Christmas. 

“Our expectation is that the RBA will deliver this via four more successive 50 basis point rate hikes in August, September, October and November,” ANZ head of Australian economics David Plank wrote on Tuesday.

“This 200 basis points of additional tightening sees the cash rate target at 3.35 per cent by November.”

The Reserve Bank of Australia governor Philip Lowe confirmed interest rates would continue to go up.

“We are going through a process of steadily increasing interest rates and there’s more of that to come,” he said on Wednesday.

“We’ve got to move away from these very low-level interest rates we had during the emergency,” he said.

The RBA lifted the cash rate to 1.35 per cent at the start of the month.