Westpac is encouraging borrowers to take advantage of offset accounts to help manage the current uptrend in variable interest rates, following the Reserve Bank of Australia’s decision to raise the official cash rate by 50 bps.
An offset account, which works like a high-interest deposit account, allows borrowers to use their savings to reduce the interest they are paying on their mortgages.
“For customers without an offset, now could be a good time to check if their loan offers this feature and consider if it’s right for them,” the bank said in a statement.
This suggestion came as the bank announced that it will be passing the RBA hike on in full, which will see its variable interest rates increased by 50bps starting 21 June.
The rate increase will apply to both its new and existing customers.
Alongside the hike in mortgage variable rates, Westpac is also rolling out a term deposit rate of 2.25% p.a. for 12 months in a bid to assist its customers achieve their savings goals.
The newly announced term deposit rate will be available by 9 June.
Aside from maximising offset accounts, Westpac also suggested changing the repayment frequency to biweekly to reduce the total term and interest costs of a mortgage.
“By paying more frequently, customers are reducing the principal amount sooner as they will make the equivalent of an extra month’s repayment each year,” the bank said.
Furthermore, customers can also consider switching to a fixed or a split loan to ensure certainty on rates, especially given the projections that more hikes are happening until the end of the year.
Westpac chief executive for consumer and business banking Chris de Bruin said the bank is open to helping the customers manage their finances amid the changing interest-rate environment.
“Customers can use online mortgage repayment calculators to see how adjusting their loan amount, term or interest rate will impact them or help pay off their loan sooner,” he said.
Mr de Bruin said this can help customers plan ahead and foresee how interest rate hikes will impact their repayments.
“For customers who need some extra help or who are in financial difficulty, we have our specialist teams standing by who will work with them to tailor a financial solution to meet their needs,” he said.