Westpac Lifts But Tips No RBA Rise

Posted on 31/08/2018  
Westpac Lifts But Tips No RBA Rise

Westpac has forecast that the official interest rate set by the Reserve Bank is likely to remain on hold not only through 2018 and 2019 but also 2020 – but has announced it is lifting its own mortgage rates.

Westpac chief economist Bill Evans says the RBA will keep interest rates on hold until 2021, defying RBA Governor Philip Lowe's suggestion that the official rate will rise "at some point" in the near future.

Market economists see the cash rate increasing in the second half of 2019, but Evans has extended his forecast for no change in policy settings until December 2020 (he previously forecast no change until March 2020).

Evans notes that new lending to housing investors has fallen 25% over the last year; housing credit growth is likely to slow from 6.5% in the year to September 2017 to 4% in 2018/19 and 2019/20.

Meanwhile, Westpac became the first major bank to lift its mortgage rates this year, announcing a 0.14 percentage point increase – which is about half the size of a standard move in official rates set by the RBA, which has not moved rates in two years.

Westpac chief executive Brian Hartzer says the increase was needed to reflect higher wholesale funding costs.

« Back