Westpac becomes the last of the Big Four banks to raise interest rates - as borrowers cop the fifth increase in a row

  • Westpac is last of the Big Four banks to raise variable mortgage interest rates
  • The increase matches Reserve Bank's September rise of 0.5 percentage points
  • Borrowers with average $600,000 loan to see $175 monthly repayments rise

By STEPHEN JOHNSON, ECONOMICS REPORTER, AUSTRALIA

Published: | Updated:

Westpac has become the last of the Big Four banks to raise its variable mortgage rates.

The bank is hiking up lending rates by 0.5 percentage points to match the Reserve Bank's latest September increase that has taken the cash rate to a seven-year high of 2.35 per cent, up from a previous six-year high of 1.85 per cent.

This will see Westpac's lowest variable rate rise to 4.39 per cent, up from 3.89 per cent, from September 20 - as borrowers cop the steepest rate increases in almost three decades.

That means a Westpac borrower with an average $600,000 mortgage will see their monthly repayments climb by $175 to $3,002, from $2,827.

Westpac's introductory rate, available for two years, rises to 3.99 per cent from 3.49 per cent.  

Westpac has become the last of the Big Four banks to raise variable mortgage rates for the fifth straight month (pictured is a Sydney branch)

Westpac has become the last of the Big Four banks to raise variable mortgage rates for the fifth straight month (pictured is a Sydney branch)

Chris de Bruin, Westpac's chief executive of consumer and business banking, acknowledged times were tough for borrowers in Monday's announcement.

What the banks are now predicting

COMMONWEALTH BANK: A 2.85 per cent cash rate by November (up from a previous forecast of 2.6 per cent)

ANZ: A 3.35 per cent cash rate by December (a month later than earlier prediction for November) 

WESTPAC: A 3.35 per cent cash rate by February (unchanged) 

NAB: A 2.85 per cent cash rate by November (unchanged) 

Source: RateCity

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'We understand that many Australians are carefully managing their household budgets at this time and we're here to support our customers through the changing interest rate cycle,' he said.

The other major banks - ANZ, NAB and Commonwealth - all announced 0.5 percentage point increases late on Friday afternoon, following news the Queen had died aged 96.

Unlike Westpac, their increases to variable mortgage rates are coming into effect on September 16.

The latest 50 basis point increase means ANZ's lowest variable rate will rise to 4.19 per cent from 3.69 per cent.

CBA is also raising its variable rates by 0.5 percentage points to 4.19 per cent from 3.69 per cent.

NAB's lowest variable rate is rising by 0.5 percentage points to 4.24 per cent from 3.74 per cent.

So far, 18 banks have raised their variable mortgage rates in line with the RBA, a RateCity analysis showed. 

The Reserve Bank has raised rates in May, June, July, August and now September by 2.25 percentage points - the steepest pace of increases since 1994.

They are increasing lending rates by 0.5 percentage points to match the Reserve Bank's latest September increase, that has taken the cash rate to a seven-year high of 2.35 per cent, up from a previous six-year high of 1.85 per cent. Governor Philip Lowe (pictured on Thursday) gave a speech, which economists interpreted to mean the RBA would raise rates two more times during this tightening cycl

They are increasing lending rates by 0.5 percentage points to match the Reserve Bank's latest September increase, that has taken the cash rate to a seven-year high of 2.35 per cent, up from a previous six-year high of 1.85 per cent. Governor Philip Lowe (pictured on Thursday) gave a speech, which economists interpreted to mean the RBA would raise rates two more times during this tightening cycl

Governor Philip Lowe on Thursday gave a speech, which economists interpreted to mean the RBA would raise rates two more times during this tightening cycle. 

Chris de Bruin, Westpac's chief executive of consumer and business banking, acknowledged times were tough for borrowers

Chris de Bruin, Westpac's chief executive of consumer and business banking, acknowledged times were tough for borrowers

'We are conscious that there are lags in the operation of monetary policy and that interest rates have increased very quickly,' he told the Anika Foundation.

'And we recognise that, all else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises.'

Westpac is expecting a 10-year high RBA cash rate of 3.35 per cent by February while ANZ is predicting that will occur in December, a month later than a previous forecast. 

The Commonwealth Bank, Australia's biggest home lender, is forecasting a 2.85 per cent cash rate by November, up from a previous forecast of 2.6 per cent by Melbourne Cup day.

Inflation in the year to June surged by 6.1 per cent, the fastest pace since 1990 without the one-off effect of the GST being introduced in 2000. 

The RBA is expecting the consumer price index to hit a 32-year high of 7.75 per cent in 2022, a level well above its 2 to 3 per cent target. 

What Westpac's latest increase means for borrowers on lowest rate

$500,000: Up $145 to $2,501 from $2,356

$600,000: Up $175 to $3,002 from $2,827

$700,000: Up $204 to $3,502 from $3,298

$800,000: Up $233 to $4,002 from $3,769

$900,000: Up $262 to $4,502 from $4,240

$1,000,000:  Up $291 to $5,002 from $4,711

Calculations based on Westpac's lowest variable mortgage rate for existing borrowers rising to 4.39 per cent from 3.89 per cent effective September 20 to reflect the Reserve Bank of Australia in September raising the cash rate by 0.5 percentage points to a 2.35 per cent from 1.85 per cent

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