Westpac defends rate rise

A Westpac official has spoken out in defence of the decision to hike its variable rates.

Westpac has defended its decision to increase its variable rates above the official interest rate set by the Reserve Bank of Australia, in news that may be pertinent to people with Aussie credit and credit cards.

Just hours after the RBA announcement to raise the base rate by 25 basis points to 3.75 per cent, Westpac said it would implement a hike of 45 points.

The decision received criticism from treasurer Wayne Swan, who warned of a customer backlash, the Australian reports.

However, the bank defended its position, blaming financial strain on the institution as the reason for the jump.

Speaking to the news provider, Peter Hanlon, Westpac's group executive for retail and business banking, said: "The margin looks back, not forwards and we are feeling the pressure from rising average funding costs."

He also noted the bank's online savings accounts and term deposits are some of the best accounts on the market, with interest rates being the highest it has ever offered.

RBA governor Wayne Swan this week justified the cash rate rise by saying the economic downturn in the country had been relatively mild and buoyed by recent signs of growth.

Posted by Emma North