Westpac has today increased its mortgage rates for both residential owner-occupier and investment lending by 0.2%, or 20 basis points.
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The big banking group announced the move to the Australian Securities Exchange (ASX) after having earlier entered a trading halt before announcing a $3.5 billion capital raising also in response to the new liquidity requirements.
The headline residential investment property variable rate will climb to 5.95 per cent.
Markets continue to expect another quarter of a percentage point cut in official interest rates but economists now believe the Reserve will sit tight.
“This is a hard decision and one that is not taken lightly”.
The Australian reports that CMC chief market analyst Ric Spooner warned that if Westpac’s rivals followed its increase in rate hikes, consumer and property investor confidence was likely to be hit badly in the future.
“We acknowledge that it does impact customers, even in an environment where interest rates remain near historic lows”.
Assistant Treasurer Kelly O’Dwyer said it was up to Westpac to justify its rate hikes.
The bottom line to regulatory moves to ensure the major banks are in the top quartile when it comes to capital safeguards among their global peers – as recommended by the Murray Financial System Inquiry – was always going to come at a cost.
Fixed rate mortgages will remain unchanged.
Savers will also benefit as Westpac will increase interest rates on a few new term deposits by 25 basis points from Friday.
“We have sought to carefully balance the needs of our borrowers, depositors and our shareholders”, Frazis said. Statutory profit for the year rose six per cent from last year to $8 billion. Over the past six months all the banks have been fortifying their balance sheets by either raising fresh equity or selling assets to bolster cash. In May NAB raised $5.5 billion of capital.
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The offering takes the total capital raised by Australia’s biggest four banks to nearly A$20 billion this year.
