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Westpac is jacking up all of its variable home loan interest rates by 0.2 percentage points, a move it has blamed on rules forcing banks to hold larger loss-absorbing capital buffers.
The country's second biggest bank on Wednesday announced the change, which will increase headline owner-occupier rates to 5.68 per cent, and investor rates to 5.95 per cent.
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The chief of Westpac's consumer bank, George Frazis, said the increase was a response to the bank being required to hold 50 per cent more capital against mortgages.
Raising capital lowers the profitability of bank lending, putting pressure on banks to pass on some of the costs to customers where possible.
Westpac says this raising places its capital ratio "within the top quartile of banks globally".
"Capital raised responds to changes in mortgage risk weights that will increase the amount of capital required to be held against mortgages by more than 50 per cent, with the increased regulatory required to be applied from July 1, 2016," the bank said in a statement
The rate hike will take effect from November 20, and puts the spotlight on the home loan interest rates charged by the other banks, which tend to copy each other on mortgage rates. The changes apply only to Westpac-branded loans, not St George, Bank of Melbourne or BankSA.
Read more at Sydney Morning Herald