On a June morning in 2022, Australia's Reserve Bank had just surprised markets with a half-point lift in the cash rate, and Westpac was the first of the big lenders to carry that weight into ordinary households. It is the familiar turning of a long cycle: the cost of borrowing rising after years of ease, felt first by those with the largest debts and eased only slightly by savers finally earning a little more. Westpac's move, reaching into both new and existing home loans, marks the point where a central bank's decision stops being a headline and becomes a line in a family's budget. What comes
Westpac Becomes First ASX 200 Bank to Pass On RBA's 0.5% Rate Hike to Mortgage Customers
Only one bank had moved by morning: Westpac, passing on every basis point.
Mark
Why does it matter that Westpac moved first?
Mimi
Because it sets the benchmark. The RBA raised the cash rate by 0.5% to 0.85%, and Westpac passed all of that on to variable borrowers, new and existing, from 21 June. The other banks now have to decide whether to match it.
Mark
And the savers get something too?
Mimi
A new 12-month term deposit at 2.25%, and higher interest on its one-year term deposits. It's a smaller offset, but it's there.
Luke
Careful, though. The article says all the banks are likely to pass the hike on. That's an expectation, not something confirmed. Only Westpac had announced as of that morning.
Mark
Why did bank shares fall if higher rates help bank margins?
Mimi
They fell with the broader index after the 2:30pm announcement. Westpac was down 5.3% in morning trade, the worst of the banks, though it was still up 3.8% for the year.
Luke
The piece doesn't explain why Westpac fell more than the others. We shouldn't assume it's because it moved first. That's not in the reporting.
Mark
What about the claim that most customers have a buffer?
Mimi
That's Chris de Bruin's statement. He says many customers saved more and are ahead on repayments during the pandemic.
Luke
Right, and it's the bank's own characterisation. No figure is given for how many customers or how far ahead. It's attributed, not verified.
Mark
And what comes next?
Mimi
Governor Lowe indicated more hikes ahead, so this is likely the first of several adjustments, though the size and timing are unknown.
El Pulso
- The RBA's surprise half-point hike pushed the cash rate to 0.85%, catching analysts who had expected far smaller moves.
- Westpac became the first ASX 200 bank to pass the full increase on to variable home loan customers, effective 21 June.
- Bank shares sold off with the broader market, and Westpac fell 5.3% in morning trade, the worst among its peers that day.
- Westpac is cushioning the blow with a new 2.25% 12-month term deposit, while rivals are expected to match the rate rise.
- Markets are now watching whether other lenders follow in step and whether the RBA's Governor Lowe delivers further hikes.
On a June morning in 2022, Australia's Reserve Bank had just surprised markets with a half-point lift in the cash rate, and Westpac was the first of the big lenders to carry that weight into ordinary households. It is the familiar turning of a long cycle: the cost of borrowing rising after years of ease, felt first by those with the largest debts and eased only slightly by savers finally earning a little more. Westpac's move, reaching into both new and existing home loans, marks the point where a central bank's decision stops being a headline and becomes a line in a family's budget. What comes next depends on whether the rest of the banking sector follows, and on how far the RBA is prepared to go.
By the morning of 8 June 2022, Westpac had already moved. Its announcement that variable home loan rates would rise by 0.5% came one day after the Reserve Bank surprised almost everyone by lifting the cash rate by that same amount, to 0.85%. Analysts had expected a quarter or 0.4 percentage point rise, so the decision landed hard, and Governor Philip Lowe's signal that more hikes would follow only deepened the unease.
Westpac was the first ASX 200 bank to pass the full increase on. The change applies to new and existing variable-rate customers from 21 June. For borrowers with large mortgages it is unwelcome news, though savers were offered a small consolation in the form of a new 2.25% twelve-month term deposit and higher rates on existing one-year deposits.
Chris de Bruin, the bank's chief executive for consumer and business banking, said rate changes affect households differently. He pointed out that many customers had built up savings and offset balances during the pandemic and were ahead on repayments, which he hoped would help them absorb the rise.
Investors were less forgiving. Westpac shares fell 5.3% in morning trade, even though the stock had been one of the stronger performers in the sector this year. The coming weeks will show whether the other major banks match the increase and how many more rises the RBA ultimately delivers.
By the time most Australians had their morning coffee on 8 June 2022, one of the country's big banks had already moved. Westpac announced that it would raise its variable home loan rates by 0.5%, passing on in full the increase the Reserve Bank of Australia had delivered the afternoon before. No other bank in the S&P/ASX 200 Index had done so as of that morning.
The RBA's decision caught most analysts off guard. Consensus forecasts had pointed to a rise of 0.25% or 0.4%. Instead the central bank lifted the official cash rate by 0.5%, taking it to 0.85%. Governor Philip Lowe signalled that more increases were coming, describing a series of additional hikes ahead.
The announcement came at 2:30pm AEST, and the share market reacted poorly. ASX 200 bank shares sold off alongside the broader index, even though financial stocks are among the few that can potentially benefit from higher rates. The logic is simple enough: banks only widen their lending margins if they raise their own rates when the official cash rate goes up. It is likely that every ASX 200 bank will do so, but Westpac Banking Corp (ASX: WBC) was first.
The increase applies to both new and existing variable-rate customers and takes effect on 21 June, two weeks after the RBA's move. For borrowers with large mortgages, the news is unwelcome. Savers received something in return: Westpac introduced a new 12-month term deposit paying 2.25%, and it also lifted the interest on its one-year term deposits.
Chris de Bruin, Westpac's chief executive for consumer and business banking, addressed the change directly. He said a shift in interest rates affects every household budget differently, and that customers had managed their finances carefully through the pandemic, many building up savings and offset account balances. In his telling, that means most Westpac customers are ahead on their mortgage repayments and hold a buffer to help absorb a rate rise.
The market's verdict on Westpac itself was harsh. In morning trade its shares fell 5.3%, making it the worst performer among the ASX 200 banks that day. That drop comes against a stronger backdrop for the stock this year: Westpac had outperformed both the other banks and the broader ASX 200, with shares up 3.8% so far in 2022.
What to watch now is whether the other major lenders match Westpac's full 0.5% pass-through, and how quickly they do it. Beyond that, the bigger question is how many more increases the RBA delivers, since Lowe has made clear this one is unlikely to be the last.
Citas Notables
A change in interest rates affects every budget differently, and the majority of customers are ahead on repayments with a buffer to manage an increase.— Chris de Bruin, Westpac consumer and business banking chief executive (paraphrased)
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