Westpac has defied a furious Treasurer and increased its standard variable mortgage rate by almost double the 0.25 point increase decided on at Tuesday's Reserve Bank board meeting.
The extraordinary 0.45 percentage point increase will add a further $84 to the monthly cost of repaying a $300,000 mortgage, instead of the $48 that would have been imposed had Westpac merely passed on the Reserve Bank's 0.25 point hike .
Accusing Westpac of cynically using the Liberal leadership turmoil as cover for an unprecedented interest rate gouge an enraged Wayne Swan spoke of a "severe backlash" and warned others not to follow its lead.
Late yesterday neither the ANZ, the National Australia Bank nor the Commonwealth Bank had indicated whether it would follow Westpac's lead.
"I see no justification at all for this move by Westpac cynically trying to use the cover of today's other events," the Treasurer said after being blindsided by the bank just minutes after he had held a parliamentary press conference...
"Westpac and any other bank that follows Westpac's cynical lead have given their customers a slap in the face for Christmas this year."
I think Westpac and any other bank that follows Westpac’s lead can expect a very severe backlash from their customers and from the community generally."
Westpac's chief executive Gail Kelly was unavailable to respond to Mr Swan. Speaking at 5.45 pm a spokeswoman Jane Counsel said Ms Kelly was at a dinner and uncontactable.
"This is bank bashing, isn't it?" she said before promising a response from the bank's group executive in charge of retail and business banking Peter Hanlon who had not responded by 7.00 pm.
In the written statement announcing the rate rise Mr Hanlon said Westpac had withheld passing on the full amount of increased funding costs "to ensure we could continue to support our customers through the economic downturn".
"While it is now necessary for us to pass on some of these increased funding costs, we will continue to take a considered approach to managing the impact on our customers of the challenging funding environment," the statement added.
Westpac was emboldend by Reserve Bank research reported in the Herald last month concluding that
mortgage margins "have actually declined a little over the past two years" .
A respected industry source said the extra 0.20 point margin over the cash rate Westpac will get from the hike was at the upper limit of what would be needed to restore its mortgage margins to where they were two years ago.
"There's enough fuzzyness around this for Westpac to justify it, but it's well and truly at the upper end," said the source.
Westpac and other banks are paying more for wholesale funds raised overseas, although this has eased in recent months, and much more for deposits. It will also increase deposit rates by a further 0.45 points.
Mr Swan appeared to reject the Reserve Bank's analysis yesterday saying he could not see "any justification for banks to pass through more than the official cash rate" He understood to be acting on separate advice.
The Westpac move will have added a total of $176 to the monthly cost of repaying a $300,000 mortgage since October. If it had merely passed Reserve Bank hikes the increase would have been $140.
Published in today's SMH and Age
Westpac Increases Rates - December 1 2009
From: Peter Martin
Date: Tue, Dec 1, 2009 at 8:56 PM
Subject: Dear Julia, It is 8.50 pm. I am unable to leave a message on your mobile phone.
It is 8.50 pm.
I am unable to leave a message on your mobile phone because your phone will not accept them.
You phoned me one hour ago at around 7.50 pm and told me that Peter Hanlon would phone me when he finished speaking at a conference in about 10 minutes time, which would have been around 8.00 pm.
I understand that 10 minutes can be a stretchable concept.
But it has been an hour.
I am going to have to go home soon.
Thank you for your efforts.
The Sydney Morning Herald
The Melbourne Age
The National Times
. Green light - Reserve gives banks the all-clear to nudge up rates
. A third interest rate hike. Let's be honest about why.