It's likely that all of the S&P/ASX 200 Index (ASX: XJO) banks will move to pass on the latest rate rise from the Reserve Bank of Australia (RBA). Though as of this morning, only one has done so.
Yesterday, the RBA surprised most analysts with a higher than expected 0.5% increase in the official cash rate. The consensus forecast had been for a 0.25% or 0.4% rise. The official cash rate now stands at 0.85%, with RBA governor Philip Lowe indicating a series of additional hikes ahead.
Despite financial stocks being among the few to potentially benefit from higher rates, ASX 200 bank shares sold off alongside the broader index following the 2:30pm AEST announcement from the central bank.
Of course, for the banks to increase their lending margins amid the higher official cash rate, they need to up their own lending rates.
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Westpac the first mover among the ASX 200 banks
The first of the ASX 200 banks to do so is Westpac Banking Corp (ASX: WBC).
This morning Westpac announced it was raising its home loan variable interest rates by 0.5% for both new and existing customers. The higher rates take effect starting 21 June, two weeks post the RBA's hike.
While that won't come as good news to customers with sizeable mortgages, savers will take heart from the bank's introduction of a new 12-month term deposit paying a 2.25% interest rate.
Commenting on the rate rise, Westpac consumer and business banking chief executive Chris de Bruin said:
We know a change in interest rates affects every budget differently. Our customers have managed their finances carefully during the pandemic, with many putting more funds aside in their savings and offset accounts. This means the majority of our customers are ahead on mortgage repayments and have a buffer available to help them manage an interest rate increase.
Westpac share price snapshot
The Westpac share price is the worst performer among the ASX 200 banks today, down 5.3% in morning trade.
Year to date, Westpac has outperformed the other banks and the ASX 200, with shares up 3.8% so far in 2022.
