In wake of Westpac’s decision to hike home loan rates, the Finance Brokers Association of Australia has called on brokers to “stay on top” of changes to help clients manage “market fluctuations”.
The executive director of the Finance Brokers Association of Australia (FBAA), Peter White, has said that recent rate hikes from lenders, including Westpac, present mortgage brokers with a “valuable opportunity” to increase market share.
Westpac is the latest lender, and first major bank, to lift interest rates, announcing 14 basis point rises on all its variable home loan products, effective 19 September.
Westpac’s rate changes are as follows:
George Frazis, Westpac’s chief executive, consumer bank, said in a statement that the decision was largely influenced by a rise in wholesale funding costs.
“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.
“Wholesale funding is an important component in our mortgage pricing. In particular, the bank bill swap rate, which is a key wholesale funding rate for mortgages, increased by about 25 basis points between February and March this year and has remained elevated.”
Mr Frazis added that despite initially expecting funding pressures to ease, the bank now expects such pressures to persist in the longer term.
“We initially hoped that this increase would be temporary, and therefore we have incurred these costs over the last six months. The rate changes announced today will not recover these costs,” the chief executive said.
“We now believe wholesale funding costs will remain high for the foreseeable future.
“Given the step change in our funding costs, we have made what we believe is the appropriate decision: to balance the interests of all of our stakeholders by remaining both unquestionably strong and competitive in the market.”
Westpac, along with Commonwealth Bank and NAB, has also recently reported increased pressures on its net interest margin.
Westpac also noted that the 14 basis point increase would add $35 to the interest cost per month of an average home loan of $300,000, and claimed that 68 per cent of Westpac Group home loan customers are ahead on their repayments.
However, Mr White has said that he believes brokers have an opportunity to consolidate their market share, with rate rises expected to further damage the public’s perception of the banking sector.
“The level of distrust in our banks is at an all-time high and that has been heightened by the evidence given so far at the banking royal commission,” the FBAA executive director said.
“Brokers have retained their positive reputation compared to banks, providing a valuable opportunity for the sector to increase its market share and provide tailored loan solutions to clients.”
Mr White added that brokers can help cut through the confusion of current interest rate fluctuations and deliver products that meet the needs of individual clients.
“Interest rates can vary on a daily basis across many different loan products, and it’s our job to stay on top of these market fluctuations so we can provide the best fit for clients,” Mr White said.
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