Westpac has hiked the variable interest rates on residential owner-occupied and investment loans by 20 basis points.
The new rates, effective 20 November, follows the major bank’s announcement it was raising an additional $3.5 billion in ordinary equity in response to new regulatory requirements that will increase the cost of providing mortgages.
According to Westpac’s ASX statement, the headline owner-occupier home loan variable rate will increase to 5.68% (comparison rate 5.82%). The headline investment property variable rate will increase to 5.95% (comparison rate 6.09%).
However, most Westpac variable home loan customer who receive a Premier Advantage Package discount of 0.70% will move to a discounted package rate of 4.98% for owner-occupied loans (comparison rate 5.35%) and 5.25% for investment loans (comparison rate 5.62%).
Depositors, on the other hand, will receive a 25 basis point increase on selected new term deposits, effective from 16 October.
George Frazis, the chief executive, consumer bank, says that following regulatory changes, the amount of capital that needs to be held against mortgages will increase by more than 50%.
“As we have always said publicly, while Westpac is well placed to meet these changes, a significant increase in capital ultimately increases the cost of providing home loans to customers.
“This is a difficult decision and one that is not taken lightly. We acknowledge that it does impact customers, even in an environment where interest rates remain near historic lows. We have sought to carefully balance the needs of our borrowers, depositors and shareholders, as well as the competitive market we operate in. increases in the cost of doing business inevitably influence business decisions, including price.”
The additional $3.5 billion in CET1 capital means the total amount of capital raised this year by the major bank in response to regulatory changes is about $6 billion.