One bank has passed on the increase to customers in full
Following the RBA’s announcement of the 0.5% rate hike, Australia’s major banks have started to respond, with Westpac passing on the full increase to new and existing borrowers on variable rates.
“Our customers have managed their finances carefully during the pandemic, with many putting more funds aside in their savings and offset accounts,” said Westpac consumer and business banking chief executive, Chris de Bruin. “This means the majority of our customers are ahead on mortgage repayments and have a buffer available to help them manage an interest rate increase.
“To help customers through the changing interest rate environment, we offer our customers a range of tools to help them manage their home loan repayments. Customers can use our online mortgage repayment calculator to see how adjusting their loan amount, term or interest rate will impact them or help pay off their loan sooner.”
Read more: RBA announces hefty rate hike
Westpac was the first bank to respond to the rate hike. The other big three had yet to act at the time of writing.
Earlier this year the four banks had been divided on how much the RBA would increase the cash rate, with CBA and NAB predicting a rise of 25 basis points, while ANZ and Westpac predicted a 40 basis-point increase. All were caught off-guard by the RBA lifting the cash rate by 50 basis points, bringing the official interest rate to 0.85%.
Read more: Get ready for an RBA rate rise – ANZ
Now, customers await news from their banks to hear if they will pass on the rate rise in full – which AMP chief economist Shane Oliver believes is likely.
“Banks are likely to pass the RBA’s rate hike on in full to their variable rate customers and deposit rates will rise further,” he said following the RBA announcement. “Fixed mortgage rates have already moved up in line with rising bond yields in anticipation of higher cash rates – more than doubling from record lows around 2% early last year. While the rate hike adds to the cost-of-living, the RBA has little choice but to ‘normalise’ interest rates.”
