The big four bank on Wednesday announced it would raise the rate by 0.20 percentage points to help cover the cost of new capital requirements.
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According to Westpac’s statement, the headline investment loan variable rate will increase to 5.95% (comparison rate 6.09%), while the headline owner occupied loan variable rate will increase to 5.68% (comparison rate 5.82%).
The RBA did not react when major lenders increased interest rates to investors and wound back discounts on home loans earlier in 2015, CBA chief economist Michael Blythe said.
Westpac’s home loan rates for owner occupiers and investors will jump by 0.2% on November 20. Revenue rose 7 percent, driven by 7 percent growth in lending, 5 percent increase in deposits, and a four basis point rise in margins.
Regardless of Westpac blaming the hike on rules that force the bank to hold larger loss-absorbing capital buffers, it doesn’t change the fact that many buyers will take this as a clear indicator of future unpredictability as banks clearly signal a willingness to be out of step with the RBA.
Westpac’s decision to lift its variable mortgage rates could take the gloss off a positive week for consumer confidence.
“We have sought to carefully balance the needs of our borrowers, depositors and our shareholders, as well as the competitive market we operate in”.
The additional $3.5 billion in CET1 capital means the total amount of capital raised this year by the major bank in response to regulatory changes is about $6 billion.
“Even a small weakness is likely to fuel rate cut speculation, despite all the optimism voiced by the RBA recently that a neutral strategy is now appropriate”, says Commerzbank. “Increases in the cost of doing business inevitably influence business decisions, including price”, Frazis said. The bank is predicting “low single digit” house price growth nationally over the next year, and 5 to 7 per cent in Sydney.
The financial institution, which is in a trading halt until October 19, added that it recorded a six percent rise in unaudited preliminary net profit of Aus$8.01 billion in the 12 months to September 30 compared to the previous corresponding year.
Westpac will pay a fully imputed final dividend of 94Ac a share, up 2c from a year earlier.
Economists said moves by the other banks, which account for 80 per cent of mortgages, would increase the likelihood of a cut to RBA’s cash rate.
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Westpac’s Mr Hartzer said he believed the housing market remained “reasonable”, with strong demand for homes in NSW especially.
