What does the Westpac Interest Rate Rise Mean?

You might have heard the news that Westpac is about to increase interest rates across the board by 0.20%.

The questions is, will the other banks follow suit?

To be able to answer that we need to understand why it is that Westpac made the decision to increase it's rates at all, and what the impact mihgt be on you if you live in the Scarborough or Osborne Park area. 

There are several reasons behind the rate hike, including recent regulations imposed on lending institutions which basically means they have to hold a certain amount of capital, or equity, in the bank to be able to cover the home loans they are lending out to people. (not to mention the need keep dividends stable, but you can find out more about that here)

So it stands to reason that the more they lend, the more capital or equity they have to hold, and the easiest way of acheving this is to increase interest rates.

Another reason, and not so much talked about, is that the current interest rates are actually far below where they should be.

The reserve bank hasn't dropped the official interest rates since the 5th of May this year when it cut 0.25%.  However since then the real interest rates that banks are offering owner occupiers has decreased by a further 0.20% from competition alone.

Given that all banks lenders need to comply by the same rules, and that owner occupied interest rates are actually well below where they should be there is a fair chance that the rest of the banks will eventually follow suit.

Hoever even with a slight rise, interest rates are still at all time low levels, and it's a great time to be making sure your current loan is still the best one in the market for you.

It's certainly a confusing time at the moment when it comes to home loans, however if you're interested in having a chat, and having us compare your current loan to the other 26 lenders we have acces to, feel free to give Jason Coviello a call on 0438 211 745 or send an email through to jason.coviello@mortgagechoice.com.au.


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