WESTPAC stands to make an extra $1.59 million per day by hiking the interest rates on all home loans in a strategic move made ahead of a likely Melbourne Cup day rate cut.
Experts believe the banks decision to jack up the variable rates on all owner occupier and residential investment property loans by 20 basis points was deliberately done to get it early before a November cash rate cut.
The bank has blamed the need to raise capital ahead of the next financial year Westpac and CBA have the largest mortgage portfolios in Australia therefore their minimum capital requirements are tipped to be the most impacted.
Opposition Leader Bill Shorten branded Westpacs hike in mortgage rates corporate greed.
No case has been made in my opinion by Westpac to increase its rate, this is corporate greed, he said in Canberra.
Shadow assistant treasurer Andrew Leigh said Westpac was out of line and its customers would be able to switch banks more easily thanks to changes to the law introduced by previous Labor Government, he said.
The estimated gains by Westpac and calculated by financial comparison website Mozo at $1.59 million per day, should result in the bank being questioned about the timing, spokeswoman Kirsty Lamont said.
Why have they moved so early? she asked.
This gives them the opportunity to increase their profits on their books, she said.
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AMP chief economist Shane Oliver said an interest rate hike is the last thing Australia needs. He expects the Reserve Bank of Australia to drop the cash rate when it meets next month.
The only way to offset this is for the Reserve Bank to cut interest rates at its November meeting and thats what I think they will do, Dr Oliver said.
It does seem like they are trying to anticipate a move by the Reserve Bank or egg them on but it also depends on what the other banks will do.
The hike comes into effect on November 20 and will hit the average Westpac customer by an extra $500 a year.
Westpac also announced it will raise $3.5 billion through a share entitlement offer to help increase its capital holdings.
The RBA has kept the cash rate at two per cent since May.
Aussie Home Loans founder John Symond conceded the rise would be difficult for mortgage customers to stomach despite the banks being forced to raise capital.
These days you have no hope explaining this to poor old hardworking mums and dads (capital raising) who are struggling to put food on the table and to educate their kids, he said.
He said he expects other banks to follow also jack up their rates.
Bankwests First Time Buyer Deposit Report 2015 released yesterday found for the average couple in Sydney it would take them nearly eight years to save a 20 per cent house deposit.