Westpac is facing harsh criticism in the wake of its decision to slug borrowers with a 0.20 per cent mortgage rate increase – and there’s concerns that other banks will follow suit.
The nation’s second-largest bank (by assets) is being accused of corporate greed, with Opposition Leader Bill Shorten saying that the bank’s decision to increase its rates when the Reserve Bank of Australia (RBA) is doing its best to assist the economy is “incredibly disappointing”.
Westpac responded by saying that the increase will help cover the cost of new capital requirements. However, Treasurer Scott Morrison believes the rise is excessive and well over the amount that he was advised would be enough to cover new regulations set by the Australian Prudential Regulation Authority (APRA) in July this year. The new requirements stated that banks needed to increase the amount of capital they held in relation to their mortgage loans.
Last year, Westpac posted net profits of $8 billion, which was an increase of six per cent on the previous year. Its cash earnings also rose three per cent to $7.82 billion and a further $3.5 billion was raised through discounted share issues to shareholders. All this was being done to raise its capital reserves.
It’s no wonder then that Mr Morrison has accused the bank of gouging its customers.
What’s more worrying for mortgage holders is that there are concerns of other opportunistic banks following in Westpac’s footsteps.
“After the cash rate from the Reserve Bank kept going up … the banks matched it exactly and then when the cash rate was on the way down the banks didn’t match it exactly,” said Labor finance spokesman Tony Burke.
The 0.20 per cent basis point increase to Westpac’s standard variable home loan will mean that borrowers will have to pay an extra $45 a month on an average home loan of $350,000.
What do you think of this? Is Westpac within its rights to increase its mortgage rates, contrary to the intentions of the RBA? Or do you see it as gouging? Would a move such as this encourage you to switch banks?
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