Westpac 20bps Rate Rise Across the Board

Both OO and IP.

 

http://www.smh.com.au/business/bank...c-raises-home-loan-rates-20151013-gk8fmt.html

 

"Westpac has shocked the banking sector by announcing it will raise home loan rates by 0.2 per cent as part of its move to meet the new requirements for banks to hold more capital against their mortgages.

The bank, which also announced it will raise $3.5 billion through a share entitlement offer in order to boost its capital reserves, will jack up its rates for owner occupiers and property investors on November 20."

 

glad i just had my wbc discount increased from 1.1% to 1.3% haha

 

Well if banks do this we might have a recession.

 

like the one we had at the beginning of the year when interest rates were higher?

 

It seems Westpac would like to go out of business - 80% LVR for IP's and the attractive PPOR rate they are using as a lure has now trapped all the new business into a 20 point rate hike.

Good work, Westpac.

 

What are the odds that the other big banks will follow suit I wonder...

 

11 out of 10

 

I suspect they're predicting an official RBA rate cut so they want to keep something now.

 

If the RBA raises rates, Westpac and others will most likely do it again in line with increases to funding costs.

I think the FSI touched on the funding cost impact for each additional percent of capital required to be held by banks - from memory it was quite marginal (not enough to justify a 20 bp increase)

 

Now I'm actually glad I fixed my Westpac loans.

A few years ago the standard pro-pack discount was 0.7%. With the various rises at Westpac, many investors (and owner occupiers) will effectively only enjoy 0.2% - 0.5% discount.

I can see a lot of refinancing away from Westpac coming, including owner occupiers.

Perhaps I should put a billboard outside of the local Westpac branch...

 

ShaneOliverAMP:

"Westpac 0.2% hike in all mortgage rates to cover cost of extra capotal. Other banks likely to follow. [Economy] can't handle rate hikes now so Westpac's move makes it more certain RBA will cut again. Watch Nov meeting for a 0.25% cut."

 

But where will they go to if other lenders follow suit?

 

Last week they were negotiating on rates, including investment loans. I agree that they're trying to take advantage of the current climate.

 

There's plenty of second tier lenders that are still quite attractive to borrowers. This sort of thing has happened before (around the GFC). It may be that everyone follows suit, but they won't all follow equally.

 

Westpac was lending out too much to "oversea investor" previously. Its oversea lending policy was one of the looseness in the market place.

Now, they are short on cash.....

I believe if one of the other big four banks following Westpac, it will trigger the domino effect for the whole lending market.

 

The problem with refinancing too frequently is that the costs (discharge, valuation, etc) involved could easily outweigh the rate difference.

 

Excellent point @TaylorChang. Westpac has been the go-to lender for overseas investors. Even with the new 70% LVR restriction they're one of the easier to deal with.

Some of the largest broker firms in Melbourne are staffed exclusively by Chinese speaking staff, their websites read better in Chinese. 80% of their business goes straight to Westpac.

 

Hopefully the other banks don't follow suit (particularly CBA).