The WA and national economies could be put at risk by a cash grab from Australia’s big banks, which are poised to lift mortgage interest rates to protect their bottom lines.
As figures show sharp increases in the number of West Australians falling behind on their mortgages, there are warnings the interest rate increase by Westpac — and those expected to follow from the Commonwealth, NAB and ANZ — could do major economic damage, especially in WA.
Westpac will lift its mortgage rates by 0.14 percentage points from September 19, adding $49 a month to the repayments on a $400,000 mortgage.
It was the first of the big banks to lift rates, though smaller institutions have been gradually increasing rates because of higher international borrowing costs.
Prime Minister and former treasurer Scott Morrison said Westpac had to explain its actions, signalling concern about the economic impact.
“They have to justify in this environment, when people are really feeling it, why they believe they need to clip that ticket a little harder when people in Australia and their customers are, I think, doing it tough,” he said.
Opposition Leader Bill Shorten, campaigning in Perth, told 6PR that the banks should consider slicing their profits and the pay of senior executives rather than pass on damaging interest rate rises.
WA Chamber of Commerce and Industry chief economist Rick Newnham said while confidence had been rising among the State’s consumers, cost-of-living pressures were still the biggest problem for shoppers.
“A rise in variable home loan rates will put a dampener on WA’s renewed optimism, particularly for West Australian families, given one in five consumers are currently unable to pay their bills on time,” he said.
AMP chief economist Shane Oliver said the nation was facing a series of issues which, by themselves, were easily manageable.
But a combination of low wages growth, high household debt, falling house prices, the drought and a possible change in Gov-ernment, which could mean changes to negative gearing, could create problems.
“By itself we’re talking about a 14 basis point increase but there’s a lot of other things going on, so this could be a problem,” Mr Oliver said.
“It gets worse if people think the banks are going to increase their interest rates even more — they start winding back their spending and that will feed into the economy.”
The extent of the risks posed by out-of-cycle interest rate increases by the major banks is evident in figures from ratings agency S&P Global.
Six of the 10 postcodes in Australia with the highest proportion of people behind at least 30 days on their mortgage repayments are in WA. Six per cent of people in Byford are behind.
In South Perth, the proportion has more than doubled to 4 per cent.
Other areas with high arrears rates include Beechboro, Safety Bay, Butler, High Wycombe, Maddington, Quinns Rocks and Kalgoorlie.
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