Westpac will raise its variable mortgage rates in November to help it meet increased capital requirements.
Australia’s second biggest lender blamed the move on new rules which force banks to hold larger amounts of capital in case of losses.
Increasing capital makes it more expensive for banks to lend money, explaining the rate raise announced on Wednesday.
The changes will raise headline owner-occupier rates to 5.68 per cent, and investor rates to 5.95 per cent.
“This is a difficult decision and one that is not taken lightly,” Westpac consumer bank chief executive George Frazis said.
The new rules forcing banks to hold capital buffers for losses are part of a worldwide push to bulletproof banks.
“Capital raised responds to changes in mortgage risk weights that will increase the amount of capital required to be held against mortgages by more than 50 per cent, with the increased regulatory required to be applied from July 1, 2016,” the bank said in a statement.
The decision to raise rates came at the same time Westpac announced a $3.5 billion equity raising, in a move to better its capital to mortgage ratio.
The change will come into effect on November 20, and raises the question of whether other banks will follow suit.
Westpac announced cash profits of 3 per cent this year, to $7.82 billion.
– With AAP