Westpac cuts rates for most home owners but lifts interest only loans

An underground house in the opal mining town of Coober Pedy. Torsten Blackwood/AFP/Getty Images

Westpac is encouraging mortgage customers to switch from interest only loans to principal and interest payments.

On Tuesday, home owners with variable rates paying principal and interest had their Westpac mortgage rates cut by 8 basis points.

This takes the bank’s standard variable rate for owner-occupiers to 5.24%.

However, borrowers on interest only rates for variable home loans will see their rate rise by 34 basis points to 5.83%.

And rates for investors with interest only will also increase by 34 basis points to 6.30%.

The rate changes are effective June 30.

“We hope the rate reduction will encourage owner-occupier customers with interest only home loans to switch to principal and interest repayments, helping them to pay down their home loan in this low interest rate environment,” says George Frazis, chief executive of Westpac Consumer Bank.

“There will be no switching fee.

“We understand the significance of interest rate changes to our home loan customers, so we try to balance the needs of both owner occupiers and investors in making these decisions.”

APRA’s limit on new interest only lending is 30% of new residential mortgage lending.

Frazis says the latest moves will help meet this benchmark.

Earlier this month, the ANZ announced a five basis point cut in variable interest rates for those paying principal and interest on their home loans, taking the standard variable rate to the lowest of major banks at 5.20%.