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The head of a prominent broking firm expects ANZ, Commonwealth Bank and NAB to join Westpac in lifting their variable home loan rates.
1300HomeLoan director John Kolenda said it was no surprise to see Westpac increase variable interest rates on residential owner-occupier and investment loans by 20 basis points.
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“While the RBA’s cash rate has stayed at a record-low of two per cent since May and there are expectations of further interest rate relief before the end of the year, the central bank’s decisions are rapidly becoming redundant,” he said.
“Westpac is the first to raise rates out of cycle and other lenders are likely to follow suit.
“This may force the RBA to cut rates when it next deliberates on Melbourne Cup Day, but its cuts are likely to be negated by the actions of the major banks which face additional compliance and provisioning costs.”
Mr Kolenda added that further rate relief from the RBA might not be passed on in full by lenders, and rates could increase across the board due to pressure on the major banks to meet APRA’s capital requirements by mid-2016.
“As we predicted earlier this month, we are likely to see increases of up to 50 basis points in out of cycle movements by many banks as they adjust their pricing to accommodate additional costs,” he said.
“These are certainly confusing times for borrowers with banks lifting rates outside of the RBA’s deliberations, and we will see this continue in the months ahead.”
AMP Capital chief economist Shane Oliver observed that the move by Westpac to increase its mortgage rates for both owner-occupiers and investors "is not particularly surprising as it flows from the rise in the cost of funding that [come] from higher capital requirements being imposed on the banks".
"Other banks may follow," he said.
[Related: Lender rate rises could nullify future RBA cuts, says Kolenda]
