Westpac hikes all variable home loan rates, here’s how much it’ll cost you
The moment Aussie home owners have been dreading has arrived: big bank Westpac has promised to hike rates on all variable home loan products come September 19.
This move by the big bank has come in response to increased funding costs and will see all variable loan products increase by 14 basis points for both new and existing customers.
And according to Chief Executive, Consumer Bank, George Frazis, the decision was not an easy one.
“This is a tough decision but we have a responsibility to price out mortgage products in a way that reflects the reality of our funding costs,” he said.
“Wholesale funding is an important component in our mortgage pricing. In particular the bank bill swap rate, which is a key wholesale funding rate for mortgages, increased by about 25 basis points between February and March this year and has remained elevated.”
The rate changes for variable home loan products include:
- Standard variable home loan rate for owner occupiers paying principal and interest will increase to 5.38%
- Standard variable home loan rate for owner occupiers paying interest only will increase to 5.97%
- Standard variable residential investment property loan rate will increase to 5.93% for investors with principal and interest repayments
- Standard variable residential investment property loan rate will increase to 6.44% for investors with interest only repayments
However, while the decision by the big bank may have come as a last resort, Mozo’s Product Data Manager, Peter Marshall is unsurprised by the hike and expects the rest of the big four to follow accordingly.
“It’s not surprising that Westpac is the first of the big four to hike their home loan rates. The bank’s recent profit statement made it clear that they’ve been hit hard by mounting funding costs which they've now decided they cannot continue to absorb,” he said.
“What we do know is that the big banks tend to move as pack, so it’ll be surprising if the rest of the big four don’t follow soon after.”
How much extra homeowners are expected to pay
Now that Westpac are set to feel some financial relief, Aussie households could start to feel the pinch of higher repayments and may have to tighten their budgets.
According to Mozo data, a 14 basis point hike on a typical $300,000 loan over 30 years will add an extra $26 to monthly repayments, or $9,395 over the life of the loan.
And the worst news? The rate hikes are here to stay.
“We initially hoped that this increase would be temporary, and therefore we have incurred these costs over the last six months. The rate changes announced today will not recover these costs,” said Frazis.
“We now believe wholesale funding costs will remain high for the foreseeable future.”
So if you’re an Aussie with a mortgage now thinking it’s time you considered other home loan options, check out our home loan comparison tool.