Westpac Right to Hike Rates?
There is no surprise that interest rates are on the up, and it would seem that most of us have had plenty of warning so that we can budget for the festive period; however some customers of Westpac would not have budgeted for their massive 45 base point hike. Is this morally right just before Christmas, is right that some banks surprise customers, will customers ditch Westpac?These questions have been ciculating the media this week.
HERE are 400 million reasons to switch banks – Westpac will pocket more than $400 million a year from this week’s merciless pre-Christmas interest rate hike, ripping the cash bonanza straight out of the pockets of struggling homeowners.
And if its rival banks follow suit later this week, the total fortune from the banks’ grubby grab for funds will total a staggering $1.3 billion.
The bank earned the ire of the public and political leaders on Tuesday for an act of epic greed – a shock 0.45 per cent interest rate hike, almost double the Reserve Bank’s 0.25 per cent increase, The Daily Telegraph reports.
According to figures revealed by Citigroup analysts yesterday, that extra 0.20 per cent cushion is worth a cool $402 million annually. If the Commonwealth Bank also raises its variable rate by 0.45 per cent this week, it will steal an extra $436 million from home loan customers.
Daily Telegraph, 10 Aug 2009..End of sidebar. Return to start of sidebar.
Westpac’s three big rivals remained holed up in their bunkers yesterday debating whether to mirror the 0.45 per cent hike and cash in at their customers’ expense.
It is widely expected they will, as early as today.
If they do, the only positive homeowners can glean from such collective thievery is that it may deter the Reserve Bank from lifting its cash rate in February. Effectively, the major banks would have already done the work for it.
Aussie chairman John Symond yesterday urged fed-up home loan customers at Australia’s big banks to end their apathy and leave for a better deal.
“People are apathetic and they think they’ll get a reasonable deal from the major banks and the banks play on that safety factor. If people got off their arse, they could save up to 1 per cent on the rate they are paying,” Mr Symond said.
“The banks have never ever been good at being Father Christmas.”
Despite the lack of public understanding of the bank’s move, Westpac chief executive Gail Kelly refused to talk publicly yesterday to explain her reasoning and define why the bank said its funding costs have increased, when its own statements clearly state their loan margins are increasing.
She again opted for side-kick executives to take the flak and answer the tough questions over the controversial move.
The South African-born CEO, who earned $10.6 million last year and is a mother of four, was not at her palatial two-storey home in St Ives when The Daily Telegraph visited yesterday.
A young woman who answered the door to the home on Torokina Ave said Ms Kelly was in Melbourne.
Neighbours in the leafy North Shore street said they were not concerned by recent interest rate rises.
“I didn’t even know rates had gone up,’ one woman said. “My husband looks after all that.”
Instead of Ms Kelly fronting the bank yesterday, it was her deputy Peter Hanlon, the same man who last month waxed lyrical about Westpac’s improved customer service due to the long-awaited return of bank managers.
That was a public relations victory. Yesterday, he presided over a public relations disaster.
When asked what he would say to customers considering leaving the bank, he essentially admitted the lender had borrowers over a barrel.
Why? Because its competitors would take Westpac’s lead and probably raise rates by a similarly gargantuan amount.
“They shouldn’t be spooked,” Mr Hanlon said. ” Banks work in the same market. I advise them to wait because I have no doubt other banks will move.”
Mortgage broker Loan Market Group said yesterday Westpac’s decision to lift rates at a greater pace than the RBA cash rate would not be a first.
The group’s executive chairman Sam White said the lack of competition in the loan market, or as he suggested the “concentration of power”, would lead to further excessive rises.
Meanwhile, major mortgage broker Australian Finance Group revealed yesterday it had seen a dramatic fall in the number of homebuyers choosing fixed interest rate mortgages.
It said the mortgages it wrote in November recorded the lowest proportion at fixed rates in more than five years, at just 2.1 per cent of total applications.
The group said the decline proved many borrowers did not see the “to fix or not fix” dilemma as a question of insurance against possible rate rises but were more focused on repayments.
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