Huge blow for homeowners as Westpac hikes interest rates after recording a $4.2 billion half year profit
- Westpac has hiked interest rates by 14 points on its standard variable mortgage
- Homeowners can expect to add $35 to their existing monthly repayment bill
- The bank has blamed the increase on rising wholesale funding costs
- ‘The rate changes announced today will not recover these costs’ said bank boss
Westpac has hiked interest rates for the first time in years, despite hitting a half year profit of $4.2 billion just four months ago.
Australia’s second largest lender has said it will increase interest rates on its standard variable mortgage by 14 points to 5.38 per cent for owner occupiers with principal and interest loans, and to 5.97 per cent for owner occupiers with interest-only repayments.
This will mean that those with an average home loan of $300,000 will be hit with an additional $35 on top of their existing monthly mortgage repayments, the bank said.
Westpac has hiked interest rates for the first time in years, meaning those with an average home loan of $300,000 can expect to add $35 to their existing monthly repayments
The changes will be effective as of 19th September this year and will apply to both new and existing customers.
Westpac consumer bank boss George Frazis said the increase was a tough decision but that ‘we have a responsibility to price our mortgage products in a way that reflects the reality of our funding costs’.
He noted that wholesale funding was an important component when it comes to mortgage pricing, in particular the bank bill swap rate – a short-term interest rate used as a benchmark for the pricing of Aussie dollar derivatives – which increased by about 25 points between February and March this year.
‘We initially hoped this increase would be temporary, and therefore we have incurred these costs over the last six months,’ he said.
Westpac consumer bank boss George Frazis (pictured) said the increase was a tough decision but that ‘we have a responsibility to price our mortgage products in a way that reflects the reality of our funding costs’.
‘The rate changes announced today will not recover these costs. We now believe wholesale funding costs will remain high for the foreseeable future.’
The Australian has predicted that other major lenders including Commonwealth Bank, National Australia Bank and ANZ will announced similar interest rate interests in the near future thanks to the rising wholesale funding costs.
Westpac attributed its huge profit increase earlier this year to its ‘disciplined approach’ to growth.
Chief executive Brian Hartzer – who was last year paid $5.5 billion – said that the bank had continued to ‘perform solidly’.
Wholesale funding costs increased by 25 points between February and March this year, and other major lenders – Commonwealth, NAB and ANZ – are expected to follow suit soon