Westpac hikes variable rates

It follows Westpac’s announcement, also made today, that 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.

Headline owner-occupier home loan variable rates increased by 20 basis points per annum to 5.68 per cent (comparison rate 5.82 per cent).

Headline residential investment property variable rates increased by 20 basis points per annum to 5.95 per cent (comparison rate 6.09 per cent).

Most Westpac variable home loan customers who receive a Premier Advantage Package discount of 0.70 per cent will move to a discounted package rate of 4.98 per cent for the owner-occupied home loan (comparison rate 5.35 per cent) and 5.25 per cent for the residential investment property loan (comparison rate 5.62 per cent), the group said in a trading update.

There are no changes to fixed rates, with the current Premier Advantage Package two-year fixed rate for owner-occupiers remaining at 4.29 per cent (comparison rate 5.06 per cent) and residential investment property loans at 4.56 per cent (comparison rate 5.33 per cent), according to Westpac.

George Frazis, chief executive, consumer bank at Westpac said that following regulatory changes, the amount of capital that needs to be held against mortgages will increase by over 50 per cent.

“To meet these new rules, including the significant amount of capital that we must now hold against residential mortgages, Westpac has announced today it is raising an additional $3.5 billion in CET1 capital,” Mr Frazis said.

This means the total amount of capital raised this year in direct response to regulatory changes is about $6 billion.

“As we have always said publically, while Westpac is well placed to meet these changes, a significant increase in capital ultimately increases the cost of providing home loans to customers,” he said.

“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 our shareholders, as well as the competitive market we operate in.

Increases in the cost of doing business inevitably influence business decisions, including price.”

Mr Frazis said more than 70 per cent of Westpac customers are ahead on their home loan repayments.

[Related: Adelaide Bank cuts investor home loan rates]