Westpac passes on rate hike in full but leaves savers in limbo

·2-min read
Westpac branch and houses in Sydney
Westpac has pulled the trigger and passed on increased interest rates in full to home loan customers, with the other banks likely to follow suit. (Source: Reuters/Getty)

Westpac has passed on the full 0.50 percentage point rate hike to its mortgage customers, and the other Big Four banks are expected to follow its lead.

Yesterday, the Reserve Bank of Australia (RBA) hiked the cash rate for the second time in two months to rein in soaring inflation.

Westpac moved quickly to increase its mortgage rates for new and existing customers, and RateCity research director Sally Tindall expected the other major banks to follow suit.

The bank’s standard variable rate has increased to 5.23 per cent from 4.73 per cent.

This will see a mortgage holder with a $500,000 loan paid over 25 years pay an extra $145 a month to service their loan.

Westpac home loan hike
Westpac home loan hike

What about savers?

The bank has also introduced a 12-month term deposit with a rate of 2.25 per cent from June 9 that’s 2 percentage points higher than its current 12-month term deposit rate.

Tindall pointed out that this rate was “by no means a market leader” and that it was “disappointing” to see the bank had not yet passed on the rate increase to any existing savings accounts.

Why interest rates are going up

RBA governor Philip Lowe said the bank was hiking rates to slow the rising cost of living.

“Global factors, including COVID-related disruptions to supply chains and the war in Ukraine, account for much of this increase in inflation,” Lowe said.

Few experts expected the 50-basis-point jump, with most predicting a more gradual increase back to the 2-3 per cent target range.

What can I do if I’m struggling to make my repayments?

With most banks expected to pass on higher interest rates, variable-rate mortgage holders can expect an increase to their repayments.

Many households will struggle to absorb higher repayments as they face higher cost of living and sluggish wage growth.

If you are worried about making your repayments, Finder money expert Sarah Megginson recommended reviewing your home loan to see if you could refinance and secure a better deal.

She said rates varied substantially between lenders, with the difference between the lowest variable rate and the highest variable rate about 1 per cent at the moment.

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