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RBA interest rates: Westpac decreases fixed rates as three big banks pass on full 0.50 percentage point rate hike

RBA interest rates: Westpac decreases fixed rates as three big banks pass on full 0.50 percentage point rate hike

Westpac Bank has made a surprising move, choosing to spare some customers from escalating price hike pain.

The big bank has announced it will be decreasing its four-year owner occupied fixed interest rate by one per cent, down to 4.99.

Westpac is the third of the big banks to announce its rate changes following the Reserve Bank of Australia’s decision to increase the official cash rate by 0.50% per annum (pa) on Tuesday.

The big bank has unsurprisingly followed its rivals the Commonwealth Bank and ANZ in increasing its variable home loan interest rates.

The interest rate changes will come into effect for new and existing home loan variable rate products on Thursday, August 18.

Earlier today, ANZ joined CBA in announcing it will be passing on the hike to variable rate mortgages and one savings account by the full 0.50 percentage points.

The major bank said its up-scaled up mortgage rates will come into effect for both new and existing customers from Friday, August 12.

The lowest variable rate will now be increased to 3.69 per cent – ​​just under that of CBA, which pumped up its lowest rate to 3.79 per cent.

Both rates are at three-year highs.

The ANZ decision also included increasing the rate on its new ANZ Plus Save account by 0.50 percentage points to 2.50 per cent for balances up to $250,000, which will come into place on Monday.

The move came just hours after Australia’s biggest bank, the Commonwealth Bank, announced it will pass on the full 0.50 percentage point hike to its variable home loan customers and some savings customers.

CBA will bring its occupier principal and interest standard variable home loans rate to 5.8 per cent.

Uncharacteristically, Australia’s other big banks have been slow off the blocks following the RBA’s decision on Tuesday, with CBA’s competitors Westpac, NAB and ANZ yet to make their announcements.

Mortgage rates for new and existing customers at CBA will rise by 0.50 percentage points on August 12, with investor rates rising to 6.38 per cent.

Research director at RateCity.com.au Sally Tindall said while the CBA’s decision comes as no surprise, for customers who are already feeling the heat, this fourth hike is a “difficult pill to swallow”.

“From next week, CBA’s basic variable rate will hit a three-year high of 3.79 per cent – ​​a huge increase from three months ago when it was just 2.19 per cent,” she said.

For an owner-occupier with $500,000 debt and 25 years remaining, the 0.5 percentage point hike means they will see their monthly repayments rise by $140.

To ease the strain, Commonwealth Bank is cutting its lowest four-year fixed rate to 4.99 per cent – ​​a drop of 1.60 percentage points.

This special rate, which comes into play on Friday, is strictly for owner-occupiers paying principal and interest on a package rate ($395 annual fee) for a limited time.

While Ms Tindall said the “whopping cut” will make it the lowest in its category, she warned it may not necessarily be a good idea.

“People should think carefully about whether they want to lock up their mortgage for the next four years because there can be significant consequences if they decide to break their loan,” she said.

For those with a NetBank Saver account, who will see the full rate hike, the research director said an ongoing rate of just 0.85 still won’t cut it.

“In this market, where we could see ongoing rates over 3 per cent, these savers are still getting paid peanuts,” she said.

But Ms Tindall said there are signs things could be turning around.

“On Tuesday, Macquarie announced it was making significant cuts to its fixed rates and now CBA is following suit,” she said.

“We expect this will trigger further fixed rate cuts from other lenders in response to both evolving market expectations and competition among the banks.”

Read related topics:westpac

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Economy: Winners of rising interest rates revealed

Economy: Winners of rising interest rates revealed

Homeowners and renters are bracing for more bad news with interest rates tipped to rise again, but there are some people who are benefiting more than others.

Household budgets are being stretched to their limits after inflation hit a massive 6.1 per cent and cost of living pressures, including the prices of groceries and fuel, continue to mount.

But financial experts say some parts of the community are enjoying economic success during this difficult time.

So who are the winners of rising interest rates?

Financial planner and Edith Cowan University lecturer Damon Brown told NCA NewsWire there were two big winners — withdraw and people who locked in fixed rates before the cycle changed.

“Retires who are invested in cash have been doing it tough for the past five years because interest rates on their cash have been very low and below what Centrelink deems them to be earning,” he said.

“For the older people Centrelink deems them when it comes to their the age pension they can receive.

“So it’s called deeming, which is what the Centrelink assumes they can earn from their money, but they might not actually earn that money.

“An example might be my mother who invests all her money in cash. She’s been receiving one per cent interest rate for the last few years but Centrelink assumes that she earns a bit more than that. And so she’s receiving less Centrelink entitlement.”

Mr Brown said people who locked in fixed rates before the cycle changed, like him and his wife who secured a rate just under two per cent, were also doing well.

“We actually locked in for three years a year ago, so we’ve still got another two years to take the big difference,” he said.

Daniel Kiely, a senior research fellow at the Bankwest Curtin Economics Center, told NCA NewsWire rising interest rates were not necessarily a bad thing.

“If the increase in interest rates that we are seeing both in Australia and in other global jurisdictions flow through to the economy, and in turn lead to lower inflation, we will all be winners in the long-run.” he said.

“Lower inflation will make it more unlikely for a global recession to occur.”

In the shorter-term, Dr Kiely said savers would get higher returns on their savings accounts, but the speed at which this occurred would vary from bank to bank and depending on the type of savings account.

“Withdraw may benefit too, if savings supplement another source of income such as a pension,” he said.

“However, for savers and retirees to see the full benefit of such returns, inflation will need to come down substantially.”

Dr Kiely said there was a double edge sword for potential homeowner investors.

“Higher interest rates may stem house price increases and help those saving for a home,” he said.

“But, higher interest rates will also reduce borrowing capacity for many wishing to enter the housing market.”

LCI Lending partner Domenic Romeo said there were still more losers than winners.

“However, the people who have savings in a term-deposit or savings account will benefit from higher interest income rates,” he said.

“Some property investors may find themselves in a better position to purchase a property, due to the softening property prices too.”

In this month’s Finder RBA Cash Rate Survey, 26 experts and economists agreed the cash rate would change on Tuesday, with 23 of them predicting another increase of 50 basis points.

That would bring the cash rate to 1.85 per cent in August.

“A 50 basis point rate increase will see the average Aussie homeowner forking out an additional $610 per month compared to what they were paying four months ago,” Finder’s head of consumer research Graham Cooke said.

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