Westpac Banking Corp has followed National Australia Bank's lead and hiked home loan interest rates for both owner occupiers and property investors.
Westpac said on Friday afternoon it would increase its variable rate for owner occupiers by 0.03 percentage points to 5.32 per cent for customers making principal and interest repayments.
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Westpac raises interest rates
Westpac is raising home loan rates for both owner occupiers and property investors. (Courtesy ABC News 24)
Customers making interest-only payments will have their rates increased by 0.08 percentage points to 5.49 per cent.
Property investor loans will be hiked 0.23 percentage points to 5.79 per cent for principal plus interest loans, and 0.28 points to 5.96 per cent on interest-only loans.
Westpac's chief executive of consumer banking, George Frazis, said the bank was moving rates in response to increasing funding costs and deposits, which cost the bank money through interest payments.
"We understand the significance of interest rate changes to our home loan customers, so we take a very careful approach to these decisions," Mr Frazis said.
"We try to balance the needs of both owner occupiers and investors in making these decisions while continuing to provide customers with a competitive offering across our range of products."
Variable rate small business loans will also be lifted 0.08 percentage points.
NAB on Thursday lifted rates for residents by 0.07 points and 0.25 points for investors, blaming increased funding costs and concerns about its level of lending to investors.
The banks have increased rates despite the Reserve Bank last week leaving the official cash rate at 1.5 per cent.
Australia's big four banks have been grilled by the Federal Parliament's economics committee in recent weeks, in hearings Prime Minister Malcolm Turnbull announced after they failed to pass on the Reserve Bank's 0.25 per cent rate cut to customers in full last year.
Mr Turnbull said at the time the hearings would be a chance for the banks to explain their actions to the Australian public.
Westpac is encouraging customers to move from interest-only loans to the lower-rate principal plus interest loans by waiving the switching fee until mid-June, in a sign the bank is heeding regulators' warnings on household debt levels.
The Reserve Bank of Australia this week revealed it was considering tightening bank lending standards over concerns how the financial system would cope with a collapse in property prices, with fears of an apartment oversupply looming in Brisbane and parts of Melbourne.
It emerged last week that investor borrowers had surged to account for more than half of home loans taken out in January, the highest figure since the Australian Prudential Regulation Authority brought in measures in 2015 to curb lending to landlords.
Commonwealth Bank said it would not comment on future interest rate movements. ANZ said its rates were under review.