The catalyst for this rate move is the continued effect of recent regulatory changes requiring banks to restrict growth in their investor loan books to 10% p.a., and to increase their capitol reserves to Protect against future financial crisis. Westpac's rate increase next month will assist in their building of capital reserves to help meet it's regulatory obligations.
Surprise Interest Rate increase from Major Bank
Westpac yesterday signalled they will be increasing the interest rate on existing home loan from 20th of November.
The decision to increase rates on variable Owner Occupied and Investor loans by 20 basis points (0.2%) out of cycle, was somewhat unexpected and against the recent trend of competitive rates and incentives being offered to attract new clients, particularly in the Owner Occupied space.
The concern is that this move from Westpac may have a ripple effect in the market causing other major lenders to consider moving their rates upwards. Our experience shows that these events generally take 2 or 3 weeks to play out, until we have a clear picture on the position of all lenders. We will be watching developments as they evolve over the coming weeks.
Click here to read more about Westpac's Announcement yesterday.