Major bank Westpac has hiked rates on its variable rate home loans by as much as 0.28% today.
Westpac announced changes to the variable rates on its mortgage products for both owner occupiers and investors, although investors were hit with much steeper increases. The changes are effective as of 24 March 2017.
Variable rate loans for small businesses will also increase by 0.08% (effective 3 April 2017.)
Westpac rate changes
|Product type||Increase||New rate|
|Variable home loan, owner occupier (principal and interest repayments)||0.03%||5.32%|
|Variable home loan, owner occupier (interest only repayments)||0.08%||5.49%|
|Variable residential investment property loan (principal and interest repayments)||0.23%||5.79%|
|Variable residential investment property loan (interest only repayments)||0.28%||5.96%|
Chief Executive of Westpac Consumer Bank, George Frazis, said the move was due to a number of economic and regulatory considerations.
“Today’s changes are in response to increasing funding costs. Despite home loan interest rates being at historically low levels, both deposits and wholesale funding of mortgages have increased over the last nine months,” he said.
The Reserve Bank’s official cash rate has been steady at 1.50% since it dropped to the all time low in August last year, but as Mozo has reported previously, there have been a number of out-of-cycle rate hikes by lenders.
Westpac’s increase comes directly after other big bank NAB announced a rate increase of up to 25 basis points on its variable rate loans for owner occupiers and residential investors, prompting speculation that more lenders will follow.
“NAB was first to make a move, followed by Westpac and now we may see CommBank and ANZ follow suit sometime in the near future," said Mozo Director Kirsty Lamont.
RELATED: LVRs drop as CommBank continues to tighten investment lending criteria
Frazis said that Westpac takes a “very careful approach to these decisions” and pointed out that rates for borrowers making principal and interest repayments were considerably lower than for those only repaying interest.
“Importantly, we are offering lower interest rates to customers who make principal payments to encourage customers to pay down their home loan in this low interest rate environment,” he said.
Customers who want to take advantage of those low rates, can switch from interest only to principal and interest repayments without paying a switching fee until 17 June.
"It's now more important than ever that borrowers make sure they have the best deal going, as the rate cutting party appears to be over," said Lamont. And the good news is there are still some great low rate offers out there for both owner occupiers and investors. Find them with Mozo’s home loan comparison tool.