The Australian dollar is sliding as Westpac hikes mortgage rates independent of the RBA

Mike Nelson/AFP/Getty Images

The Australian dollar has fallen sharply in response to news that, Australia’s second largest lender, has hiked mortgage rates for both owner-occupier and investor borrowers.

The bank cited a “sustained increase in wholesale funding costs” as the reason behind the out-of-cycle move.

Here’s the 5-minute AUD/USD chart showing the sharp decline in response to the news.

InvestingAUD/USD 5-Minute Chart

The large decline, more than 0.5% at one point, reflects that Australia’s remaining Big Four banks — the CBA, ANZ and NAB — are likely to follow suit now that Westpac has broken ranks, joining a swathe of other lendersthat lifted mortgage rates independently of the RBA in recent months.

Should that occur, it will further reduce the likelihood of an official increase in interest rates from the RBA in the short-to-medium term.

It also raises the prospect of a potential cut from the RBA, depending on the actions of other lenders as well as the response from borrowers.

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