Westpac CEO Brian Hartzer says he is taking full responsibility for his company's rate rise...
"My job, sometimes, is to make difficult decisions that are about the long-term sustainability of our business, and that involves addressing increases in funding costs.
Those increased funding costs have led to an increase in variable home loan rates by 14 basis points.
The move comes despite the Reserve Bank keeping the official cash rate at a record-low 1.5 percent, and after Westpac made $4.2 billion in profit in the past six months.
The increase means Westpac’s standard variable rate, now at 5.38 percent, is the highest of the big four banks. ((Westpac, Commonwealth, NAB, ANZ))
Customers with a $300,000 mortgage will pay an extra $26 a month.
Those with a mortgage of one million dollars will pay an extra $87 per month.
CEO Brian Hartzer says despite this, rates have been going down over time.
"The cost of a Westpac loan is lower, by 10 basis points, than it was three years ago. So people actually have a fair amount of capacity in their payments."
The move has sparked concern the Commonwealth Bank, ANZ and National Australia Bank may follow suit.
But they are holding off - for now.
Prime Minister Scott Morrison says consumers still have options.
"If you don't like what Westpac's done, go to another bank, because the competition is the key to a competitive, and a stronger, more accountable banking system."
Bank customers are usually loyal to their bank.
And with more than 80 percent of Australian mortgages held by the big four, and with smaller lenders having already raised their rates, it mightn't seem like consumers have much choice.
But some Westpac customers, like these people in Sydney's north, are seriously considering making a move.
Person 1: "Of course I will change banks if the interest rate has increased."
Person 2: "I just took it out of there to go elsewhere with it."
The spokeswoman for consumer website Finder.com, Bessie Hassan, says consumers need to take initiative.
"It's really up to the consumer to take matters into their own hands, jump online and seek a better rate, and make sure it has a 3 in front of it."
Analysts say the bigger worry for customers would be an interest rate increase by the Reserve Bank.
But with $1.7 trillion of mortgages held by the banks for Australian customers and around 80 percent of those at a variable rate, the experts say such a move is unlikely.
Finance analyst Brian Johnson says the banks changing rates won't have a huge impact on the economy.
"Their actual capacity to increase interest rates without causing a very big slow-down in the economy is limited."
Westpac's interest rate rise will come into effect on September the 19th.
Rishi Prabhakar is a Mortgage broker in Melbourne. He says it’s difficult for consumers to see rates increase out of cycle but there are options available with smaller lenders.
