Australian dollar falls as Westpac announces hike on variable home loan rates

Australian bank Westpac has announced it will increase variable interest rates for owner occupied and residential investment property loans, from September 18.

AUM_Homepage_Banner_Westpac_480x220

Variable mortgage rates will increase by 14 basis points, making the standard variable home loan rate rise 5.38% for owner occupiers with principal interest repayments.  

The Ausralian dollar has suffered since the announcment. IG market analyst Kyle Rodda says there are concerns for rising mortgage rates, that will put pressure on Australian households. 

'Households are already suffering from high levels of private debt and sluggish wage growth, further stifling consumption in the economy at a time when Australian consumer activity is slack. 

Ultimately, the market views this as being a drag on the overall economy and the Reserve Bank of Australia’s ability to hike interest rates in the foreseeable future.' Mr Rodda said.

The changes will add $35 to the interest cost per month of an average home loan ($300,000).

Westpac is one of the first Australian banks to increase home loan rates, stating the move reflects a “sustained increase in wholesale funding costs,’’.

Chief Executive George Frazis said, ‘This is a tough decision, but we have a responsibility to price our mortgage products in a way that reflects the reality of our funding costs.’

Data shows 68% of Westpac Group home loan customers are currently ahead of their repayments.

Mr Franzis said that despite the increase, the interest rate on a principal and interest, owner occupied loan, remans 10 basis points lower than it was three years ago.

On Wednesday Westpac (ASX:WBC) jumped 2.7 % at markets close. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Find articles by writer