Westpac next to hike floating home loan rates

The Red Bank raises all its floating mortgage rates to the highest in the market, even as wholesale rates slip. They offer an 8 month TD 'special' as a salve

15th Jun 17, 6:47pm by David Chaston

Despite today's sharp fall in wholesale rates, Westpac has announced a rise in their floating mortgage rates.

They are all up +11 bps.

That takes their floating rates to 5.95%, the highest floating rate in the market at this time and the highest level since December 2015 (when it was 6.00%).

Westpac's changes for the mortgage rate are effective for new customers on 16 June 2017, and for existing customers on July 7, 2017.

For perspective, here is the recent change history for Westpac's floating rate product:

Westpac change history	Change	Floating
	%	%
Start of 2016		5.85
March 10, 2016 (the -25 bps OCR reduction)	0.00	5.85
March 11, 2016	-0.10	5.75
August 12, 2016	-0.10	5.65
August 16, 2016 (the -25 bps OCR reduction)	0.00	5.65
November 22, 2016 (the -25 bps OCR reduction)	0.00	5.65
February 9, 2017 (the no-change OCR decision)	0.00	5.65
March 1, 2017	+0.10	5.75
March 23, 2017 (the no-change OCR decision)	0.00	5.75
April 6, 2017	+0.09	5.84
May 11, 2017 (the no-change OCR decision)	0.00	5.84
June 16, 2017	+0.11	5.95

Here is a snapshot of the current floating rates offered by key retail banks and their recent change history:

below 80% LVR	as at Dec 31, 16	as at Jan 31, 17	as at Mar 31, 17	as at Jun 15, 17
			%
	5.59	5.69	5.79	5.79
	5.65	5.80	5.80	5.80
	5.64	5.79	5.90	5.90
	5.25	5.40	5.55	5.70
	5.65	5.65	5.75	5.95

	5.55	5.55	5.65	5.75
	5.59	5.59	5.59	5.79
	5.59	5.54	5.79	5.79
	5.54	5.54	5.65	5.80

Westpac has launched a 3.50% eight month term deposit 'special' term. How long that is available has not been advised.

All current mortgage rates are here.

All current term deposit rates are here and here.

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32 Comments

by JT | 15th Jun 17, 6:55pm 1497509737

So the OCR completely redundant.

by Carlos67 | 16th Jun 17, 9:43am 1497563020

We don't own any of the major banks so why would they listen to the OCR ?

by Boatman | 16th Jun 17, 9:44am 1497563043

Not redundant , more like a fart in a South Island snowstorm , only the farter is aware of it

by Rob | 16th Jun 17, 5:48pm 1497592137

Love that analogy, because it is bang on IMHO.

by MortgageBelt | 15th Jun 17, 7:12pm 1497510769

'Floating' seems to be a misnomer now - more like 'capped on the underside, uncapped for hikes'.
Or are the very high floating rates simply designed to push borrowers into fixed rates to keep them locked in & away from bank switching (held by 'break fees' cost).

by gingerninja | 15th Jun 17, 7:17pm 1497511065

Don't tell the mortgage rate hike deniers. This will hurt their brains.

by M.Aurelius | 16th Jun 17, 7:06am 1497553596

It's hard explaining to people that what happens here and specifically the OCR is only one factor in the equation. With the Federal Reserve hike yesterday it makes sense that they put the rates up. We'll see more by the end of the year due to what is happening in Australia and the Fed signalling at least one more hike this year.

by Boatman | 16th Jun 17, 9:54am 1497563662

The only thing you need to explain to borrowers is that if your mortgage costs 4% per annum and it goes to 6% per annum , your instalments go up by half , or 50%

So if you are paying $600 a week for your hovel in Auckland , you need to find $900 a week at a 6% mortgage rate .

This is when people who have stuck their necks out , start to get into trouble

by Grant A | 15th Jun 17, 7:49pm 1497512952

Unfortunately Gingerninja, they can never be told anything as they know it all - their normal reaction is to attack the messenger so most don't bother

by MikeM | 15th Jun 17, 8:01pm 1497513705

Adding 10bps in 18 months is negligible.

by Conrad | 16th Jun 17, 9:52am 1497563572

Actually it's up 30bps from 1 January 2016 to now. Another $40 per fortnight on a 30-year $450 000 mortgage, an extra $31 000 over the life of the loan. It all adds up...

by Grant A | 15th Jun 17, 9:07pm 1497517657

Understand, for the majority of larger wholesale borrowers its already 25 - 50 bps with more to come. Mortgage rates won't be immune

by Squishy | 15th Jun 17, 9:17pm 1497518239

Probably will be some adjustment between lenders and savers if local bank deposit volume is squeezed. Also you have to take into account wholesale funding costs, overheads, executive salaries etc.

by CJ099 | 15th Jun 17, 9:54pm 1497520478

All the Ozzy banks are under quite a lot of pressure with huge numbers of over leverage home owners who tried to compete with foreign buyers on massively over priced property. Now we're in a fine mess.

Article, The Australian: Mortgage noose tipped to see property prices crash by 10 per cent

Quote: A crackdown on interest-only home lending could trigger price falls of up to 10 per cent in the red-hot markets of Sydney and Melbourne, economists warned yesterday.

“The latest moves by APRA, coming on the back of bank mortgage rate hikes over the last two weeks, the likelihood of action to boost affordability in the May budget (including a cut to the capital gains tax discount), and the surge in unit supply at a time of silly prices, are all likely to result in a slowdown in property price gains in Sydney and Melbourne this year ahead of a 5-10 per cent price fall starting next year some time,” he said.

http://www.theaustralian.com.au/business/property/mortgage-noose-tipped…

by Paradoxx | 15th Jun 17, 10:50pm 1497523803

David it would be interesting to see a plot of time vs. mortgage interest rates as an index or average of the major NZ banks for floating, 1 year and 2 years fixed. Then overlay the OCR. I think that would really show the magnitude/trend and what's going on. Just my two cents.

by Grant A | 15th Jun 17, 10:51pm 1497523906

Paradox - go to page 19 of the RBNZ's last MPS and view and understand the bottom left graph, that's the major part of the banks problem

http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Monetary…

by Boatman | 16th Jun 17, 9:49am 1497563348

@ Grant A , worse than the graph of the bottom left of page 19 of the OCR MPS . is the graph on the bottom right of page 19 of the statement ................... its of tsunami proportions

by Queen | 16th Jun 17, 10:08am 1497564533

@Boatman - Figure 4.6 Migration
Yep net migration at it's highest since 2000. Will it keep going up?

by Queen | 16th Jun 17, 10:06am 1497564405

@Grant A - Figure 4.4 -Banks’ marginal funding costs.
Other than the others following the OCR trend, I can't see anything but I am a novice. What are you suggesting? tks

by Yvil | 16th Jun 17, 9:19am 1497561586

This is not going to help building more houses for Auckland

by Boatman | 16th Jun 17, 9:41am 1497562897

So the Bank margins are massive given the OCR is 1,75% , and their WACC (weighted average cost of capital) is probably twice that at most

by Paradoxx | 16th Jun 17, 12:50pm 1497574252

Thanks @Grant A the plot I was looking for was in the upper right on page 19. However all the plots mentioned on page 19 tell an interesting story!

by solardb | 16th Jun 17, 7:39pm 1497598742

Why float at 5.95% , when you can fix for 6 months at 4.19%? If you cant manage your finances for 6 months ( more likely the first 3 months, after which I reckon you would still come out ahead if you had to break and pay break fees), then i would say you are in deep poo regardless.
I suppose what it really effects is the revolving credit type mortgages, which seem to be based on the floating rate.

by MortgageBelt | 16th Jun 17, 8:03pm 1497600218

Originally, the idea of the floating rate was that the borrower took more risk, but benefited from rate movements downwards, while accepting the risk of hikes, but now floating has a hefty premium built continually in to encourage borrowers to get locked in with lower fixed rates.

by MisterB | 16th Jun 17, 10:42pm 1497609734

Who's offering 6m @ 4.19%? ... TD rates aren't too far behind that.

by Wildcard | 17th Jun 17, 1:38pm 1497663491

A co-worker of mine got 4.19% at one year fixed from ASB earlier in the year. It rolls over in September for him.

by solardb | 19th Jun 17, 9:31pm 1497864687

I got it off ANZ a month ago . You have to ask , which most people dont seem to bother doing.

by Wildcard | 17th Jun 17, 1:36pm 1497663399

Float part of your mortgage for 5.95% and fix the rest at 4.19% to pay your debt off quicker during periods where interest rates are lower.

by Zachary Smith | 17th Jun 17, 1:44pm 1497663853

Why not fix it all and pay off a lump sum when renewal time comes around? Too afraid you will raid the coffers in the meantime?

by Wildcard | 17th Jun 17, 4:05pm 1497672339

Paying down extra house debt on a regular basis will reduce the total amount of interest paid versus balloon payments in the long run.

I don't own a house so raiding the coffers isn't a problem for me! :) It would be a problem for less financially savvy people, though.

by MortgageBelt | 17th Jun 17, 4:32pm 1497673962

So, currently, what is the 'reward' for borrowers to float?
Under the current deflationary, low interest environment, will 'floating' ever fall? Or ever be lower than any fixed rates?
The only benefit seems to be to allow flexibility to allow the borrower to switch banks and to repay extra anytime. There are no rate benefits.

by dictator | 17th Jun 17, 5:22pm 1497676924

There is no real upside as the rates are climbing. It's too risky to use a floating rate except if you are moving banks or you are down to the last mortgage payments.

People need to either pay off floating rate borrowing or fix.