Westpac raises mortgage rates

Westpac Banking Corporation has become the second of the four big banks to raise interest rates in defiance of the Reserve Bank of Australia (RBA).

Westpac announced on Friday that it would raise its standard variable home loan rate by 0.10 percentage points to 7.46 per cent, effective from February 20.

ANZ Bank earlier on Friday raised its standard variable mortgage rate by 0.06 percentage points to 7.36 per cent, three days after the RBA unexpectedly kept its cash rate on hold despite widespread expectations of a rate cut.

Westpac group executive, retail and business banking, Jason Yetton said the rate hike reflected the increased cost to the bank of raising money.

"While we believe that reducing rates in November and December last year was the right thing to do for our customers and the economy, higher deposit costs and higher wholesale funding costs since then make today's move necessary," Mr Yetton said in a statement published late on Friday.

He said that over the past four months intense competition for term deposits had increased their costs to Westpac by around 0.3 percentage points and that wholesale funding costs had also increased significantly.

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