Westpac Banking Corporation recently raised its interest rate by 14 basis points, making it the first of the big four banks to hike out-of-cycle with the Reserve Bank of Australia, after continuous cost of funding pressures.

What does this mean for consumers? Variable rate customers who currently have mortgages with Westpac and some of their subsidiaries will be forced to pay an average of $35 extra per month, or $420 per year.

RateCity Research Director Sally Tindall noted that the bank took its time before it gave into the pressure of hiking rates. However, Tindall said that this might not sit well with customers, particularly those who carry home loans.

“While banks are entitled to make a profit, some Westpac home loan customers will be disappointed with the bank’s decision to increase their interest rate.”

“Most households will be able to absorb the rate hike, however anyone who overstretched to get in the market will feel burdened by this extra cost.”

Nevertheless, the rest of the Big Four are anticipated to follow suit.

“Now that Westpac has hiked, taking the brunt of the bad PR, we expect the other three banks to follow suit.

If your bank opts to increase interest rates, Tindall advises customers to take the opportunity to start carefully weighing their options.

“Ironically, the banks are desperately seeking out customers to boost their lagging profit margins. They’re doing this by offering rock bottom rates, but only to new customers so if you’ve got a bit of equity in your home, now is a great time to consider refinancing,” she said.

Below is a table from RateCity, which shows Westpac rate hike’s impact.

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