One hour after the Reserve Bank raised the official cash rate by 25 basis points Westpac lifted its standard variable rate by 45 basis points.
The central bank decided at its board meeting yesterday to increase the rate to 3.75 per cent.
Westpac was the first big bank to raise its standard variable rate by 45 basis points to 6.76 per cent effective Friday December 4th.
Peter Hanlon Westpac's head of retail banking stated that the rate rise was regrettable but that Westpac had withheld passing on the full amount of the increased funding costs during the economic downturn.
Yesterday has been the first time since 1990 that the central bank raised its cash rate in three consecutive months.
The Dubai's debt dilemma could have more impact on interest rate rises.
Yesterday's rate rise will add nearly $50 a month on a $300,000 mortgage assuming the big banks pass on the increase.
Treasurer Wayne Swan admitted that yesterday's hike would be hard for homeowners but that interest rates could not stay low forever. Whenever interest rates go up it is hard for families to make ends meet.