Westpac raises mortgage rates

10 Feb 2012, 7:28 pm   -   Source: AAP
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Westpac has become the second of the big banks to raise its variable mortgage rate in defiance of the central bank.

Westpac Banking Corporation has become the second of the four big banks to raise interest rates in defiance of the Reserve Bank of Australia (RBA).

Westpac announced on Friday that it would raise its standard variable home loan rate by 0.10 percentage points to 7.46 per cent, effective from February 20.

ANZ Bank earlier on Friday raised its standard variable mortgage rate by 0.06 percentage points to 7.36 per cent, three days after the RBA unexpectedly kept its cash rate on hold despite widespread expectations of a rate cut.

Westpac group executive, retail and business banking, Jason Yetton said the rate hike reflected the increased cost to the bank of raising money.

"While we believe that reducing rates in November and December last year was the right thing to do for our customers and the economy, higher deposit costs and higher wholesale funding costs since then make today's move necessary," Mr Yetton said in a statement published late on Friday.

He said that over the past four months intense competition for term deposits had increased their costs to Westpac by around 0.3 percentage points and that wholesale funding costs had also increased significantly.

Mr Yetton said that by way of example unsecured five-year funding transactions raised overseas by banks to support lending in Australia were currently priced at around 2.3 percentage points over the benchmark bank bill rate.

He said that in June last year the equivalent raisings were priced at or around 1.5 percentage points over the benchmark.

Westpac calculated that the increase will translate into a $16 a month in rise in repayments on a $250,000 mortgage.

Westpac's increase makes its variable home loan rate among the most the highest of the big four banks but the bank said that 90 per cent of its customers paid far less.

The Westpac increase came only hours after Treasurer Wayne Swan attacked ANZ's rate hike, saying that bank's customers would be "ropeable".

ANZ, which also raised its business loans by 0.06 percentage points, will make its increase effective from February 17.

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