A customer walks from a Westpac bank branch in Sydney November 3, 2014.
A customer walks from a Westpac bank branch in Sydney November 3, 2014. Reuters/Jason Reed

Westpac’s subsidiary St. George bank has announced an increase in home loan interest rates by 15 basis points for both investors and owners.

The interest rate for home owners will rise to 5.69 percent per annum from Nov. 20, while the rate of interest for investors will rise to 5.94 percent per annum. The bank claimed that the increase in interest rates for home loans would be the best initiative to make up for the increased capital requirement costs that have been specified by the Australian Prudential Regulation Authority, or APRA.

In July, APRA announced a hike in capital reserves by authorised deposit-taking institutions for residential mortgages across Australia. After the announcement, four of Australia's largest banks announced that they would increase their housing loan interest rates for investors and owners.

ANZ bank raised its standard home loan rate of interest by 18 basis points, making it 5.56 percent, whereas NAB increased it by 17 basis points, leading the rate to 5.6 percent. Westpac lifted the rate to 20 basis points, while Commonwealth plans to raise its rate to 15 basis points. APRA decided to alter the lower internal rating-based, or IRB, risk weight to about 25 percent to measure the uncertainties that might emerge out of the review of the global capital framework to be done by the Basel Committee.

Based on the compatibility between the IRB and standard risk weights, the regulator will decide on any further changes in response to developments in the global banking sector. Prior to increasing its home loan interest rates, St.George had reviewed the rates very carefully based on several factors, including moves by the Reserve Bank of Australia. These factors include regulatory requirements, cost of funding, effect of present market scenario, the bank’s position amongst its customers, and returns to stakeholders.

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