Westpac is unlikely to hold out for long in keeping its variable mortgage rate steady after the Commonwealth Bank yesterday became the third major Australian financial institution to lift rates in response to the global credit squeeze after it increased its variable mortgage loan rate by 0.1%.
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The move means the Commonwealth’s variable mortgage rate is now at 8.67%, just behind NAB on 8.69%, which recently increased its rate by 0.12%, and ANZ on 8.77% after its 0.2% rise on Tuesday. Non-bank lender Virgin Money is reportedly also set to increase its variable mortgage loan rate by 0.25% today.
Westpac is now the only one of the big four banks not to have lifted rates in an attempt to recoup some of the additional costs banks are facing when borrowing on international wholesale finance markets.
However, given that the Commonwealth was considered the least vulnerable to the international credit squeeze because of its large domestic deposit base, most bank watchers now consider it likely that Westpac will also move shortly to increase rates.
Treasurer Wayne Swan says Commonwealth’s rate rise was more reasonable than the “excessive” rise by the ANZ earlier in the week. Swan says that banks “will be judged harshly by their customers in a competitive market for any excessive interest rate increases, whilst those banks which keep increases to a minimum will fare a bit better and the Commonwealth Bank is at the lower end of the scale”.