This article is from the Australian Property Journal archive
WESTPAC raised its home loan rates for residential property investors and owner occupiers, joining the National Australia Bank.
Westpac has increased its variable residential investment property rate by 0.23% to 5.79% for principal and interest repayments and by 0.28% to 5.96% for interest only loans.
At the same time, owner-occupiers will their mortgage rate increase by 0.03% to 5.32% for principal and interest repayments and 0.08% to 5.49% for interest only repayments.
Westpac consumer bank chief executive George Frazis said the decision takes into account a number of economic and regulatory factors.
“Today’s changes are in response to increasing funding costs. Despite home loan interest rates being at historically low levels, both deposits and wholesale funding of mortgages have increased over the last nine months.
Westpac has followed in the footsteps of the NAB, which last week raised its variable rate for residential property investors by 0.25% to 5.80%; whilst owner occupiers loans will increase by 0.07% to 5.32%.
The NAB said the larger increase to residential property investors is part of its commitment to “managing our investor lending growth in line with the regulator’s guidance,”
AMP Capital chief economist Shane Oliver said changes in investor rates have less impact on spending in the economy because they are tax deductible and investors are less sensitive to rate moves.
However Oliver said these out of cycle increases for owner occupier rates will cause more agitation, although he noted that the 3-7 basis point hikes are unlikely to have much economic impact and like the out of cycle rate hikes seen in November 2015 are likely to be ignored by the Reserve Bank.
“That said, if banks hike owner occupier rates by 25 basis points or more then the RBA may have to consider offsetting it with another cash rate cut. While the bank moves will lead to the usual waffle about whether the RBA still has much influence over lending rates its noteworthy that out of cycle bank moves have been a regular occurrence since the GFC and yet this did not stop mortgage rates falling to record lows in response to RBA rate cuts,”
Meanwhile Oliver said the RBA is unlikely to cut rates this year for five reasons, namely growth is still sub-par; labour underutilisation remains very high; underlying inflation is at risk of staying below target for longer; banks are raising lending rates out of cycle; and the $A has been going the wrong way.
“Another round of macro prudential controls to slow housing gives the RBA flexibility on this front. Our view remains no hike until second half 2018,” Oliver predicted.
Australian Property Journal