On a Tuesday afternoon in June, the Reserve Bank of Australia nudged the cash rate up to 4.1 per cent, and within hours Westpac had chosen to carry that weight directly into its customers' homes. It is the twelfth such step in fourteen months, a climb that has returned borrowing costs to a level not seen in about a decade, after a long stretch when money had been almost free. Behind the numbers sits a familiar human question: how long a household can keep absorbing rising costs while the economy searches for its footing against stubborn inflation. The big banks now disagree about whether the s
Westpac First to Pass On RBA's 12th Rate Hike as Cash Rate Hits 4.1%
Mortgage holders face higher repayments after a 400 basis point rise in about a year, with Westpac acknowledging some customers in financial difficulty may need support.
Twelve hikes in 14 months, from 0.1 per cent to 4.1
Mark
Westpac moved within hours. Why does it matter that it was first?
Mimi
It sets the pace. The other big banks now have to announce their own decisions, and customers can compare. Westpac's rise is 0.25 per cent for new and existing variable borrowers, effective June 20.
Mark
The scale here seems enormous.
Mimi
Four hundred basis points in about a year, from a cash rate of 0.1 per cent that lasted over two years. It's described as the fastest tightening cycle on record.
Luke
That label is the article's characterisation, though. It doesn't say who ranked it or against what.
Mark
Fair. What about the forecasts?
Mimi
They split. NAB says 4.10 is the peak. ANZ says 4.35 by August. Deutsche Bank's Phil O'Donoghue expects multiple hikes before year's end.
Luke
And those are predictions. CommBank and Westpac both forecast a 3.85 per cent peak and were wrong, which is a reason to hold all of these loosely.
Mark
What did Westpac say about customers struggling?
Mimi
Chris de Bruin said most are managing okay but it's getting harder with each change. The bank is contacting some customers and urging those in difficulty to call early.
Luke
Worth noting there's no figure on how many customers are struggling. "Majority managing okay" is the bank's own view.
Mark
So what's unknown?
Luke
Whether the other three banks will pass it on in full, and whether this really is the peak. The article doesn't settle either.
O Pulso
- The RBA's twelfth rate hike in fourteen months lands on households already stretched by a 400 basis point climb.
- Westpac becomes the first of the big four to pass the increase on, with variable loan rates rising 0.25 per cent from June 20.
- Westpac is reaching out to customers who may need support, urging anyone in financial difficulty to call early.
- NAB sees 4.1 per cent as the peak, while ANZ expects another rise to 4.35 per cent, leaving the big banks split on what comes next.
- Deutsche Bank warns that multiple further hikes before year's end are likely, and the only open question is timing.
On a Tuesday afternoon in June, the Reserve Bank of Australia nudged the cash rate up to 4.1 per cent, and within hours Westpac had chosen to carry that weight directly into its customers' homes. It is the twelfth such step in fourteen months, a climb that has returned borrowing costs to a level not seen in about a decade, after a long stretch when money had been almost free. Behind the numbers sits a familiar human question: how long a household can keep absorbing rising costs while the economy searches for its footing against stubborn inflation. The big banks now disagree about whether the summit has been reached, and that disagreement itself tells us how uncertain the road ahead remains.
On Tuesday afternoon, hours after the Reserve Bank of Australia lifted the cash rate by 25 basis points to 4.1 per cent, Westpac became the first of the big four banks to say it would pass the increase on to customers. It was the central bank's twelfth hike in fourteen months, pushing the cash rate to its highest level in eleven years. Only a short while ago Australians had lived with a pandemic-era rate of 0.1 per cent. Since then mortgage holders have absorbed a 400 basis point rise, one of the fastest tightening cycles on record, driven by inflation that has refused to ease.
Westpac's variable home loan rates will rise 0.25 per cent for new and existing customers from June 20. The bank also offered a special term deposit at 4.50 per cent for terms of 12 to 23 months. Chris de Bruin, its head of consumer and business banking, acknowledged that each rise makes household budgets harder to manage. Westpac, he said, is contacting customers who may need extra help, and anyone worried about falling behind should call early.
The forecasts from the big four are divided. NAB believes today's rate is the peak and expects a fall to 3.10 per cent within a year. ANZ is the most pessimistic, predicting a terminal rate of 4.35 per cent by August, which means at least one more increase. CommBank and Westpac both misjudged the peak at 3.85 per cent. Deutsche Bank's chief economist, Phil O'Donoghue, now expects several more hikes before the year ends, with only the timing unresolved. The other three majors will soon announce their own responses, and the gap between NAB and ANZ will be tested by the RBA's next decision.
On Tuesday afternoon, within hours of the Reserve Bank of Australia lifting the cash rate by 25 basis points to 4.1 per cent, Westpac became the first of the big four banks to say it would pass the increase on to its customers.
The move was the central bank's 12th rate hike since May last year, 12 increases in 14 months. The cash rate is now at its highest level in 11 years. For more than two years Australians had lived with a pandemic-era low of 0.1 per cent. Since then, mortgage holders have absorbed a 400 basis point rise in roughly a year, in what has been described as the fastest tightening cycle on record. The reason is inflation, which has stayed stubbornly high.
Westpac's variable home loan rates will rise by 0.25 per cent for both new and existing customers, effective June 20. The bank also announced a special term deposit offer for some customers: 4.50 per cent for terms of 12 to 23 months, effective June 9.
Chris de Bruin, Westpac's head of consumer and business banking, acknowledged the strain. He said the bank understands that rate increases put more pressure on household budgets, and that while most customers are managing okay, each rate change makes it more challenging. Westpac, he said, is reaching out to some customers who may need extra support and has competitive rates available for those rolling off fixed loans. Customers in financial difficulty, he added, should call the bank early if they are worried.
The decision follows a round of cash rate forecasts from the four largest banks, and the picture is mixed. NAB called 4.10 per cent as the terminal rate, meaning it expects today's level to be the peak, and thinks the rate will fall to 3.10 per cent over the following 12 months.
ANZ had the grimmest outlook of the four. It predicted a terminal rate of 4.35 per cent, not reached until August, which implies at least one more increase before relief arrives.
CommBank and Westpac both got it wrong. Each had predicted a peak of 3.85 per cent. CommBank expected the RBA to pause this month and the cash rate to be back down to 2.6 per cent by August next year. Westpac thought the rate would bottom out at 2.10 per cent in May next year.
Phil O'Donoghue, chief economist at Deutsche Bank, offered a blunt assessment: his bank now anticipates the likelihood of multiple rate hikes before the end of the year. The only remaining uncertainty for Deutsche, he said, is when those hikes will happen.
With Westpac's increase set for June 20, the other three big banks are expected to announce their own responses, and the gap between the NAB and ANZ forecasts will be tested by whatever the RBA does next.
Citações Notáveis
We understand interest rate increases put more pressure on household budgets.— Chris de Bruin, Westpac head of consumer and business banking
Deutsche Bank anticipates multiple rate hikes before year's end; the only uncertainty is when.— Phil O'Donoghue, chief economist, Deutsche Bank (paraphrased)
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Economy & Finance