Westpac’s decision this week to raise interest rates on both investor and owner occupier loans has been described as a necessary and unsurprising move.

The bank this week announced that from mid-November it will be raising interest rates by 0.2%, and in a statement said it was in response to a need to hold more capital against their mortgage book.

While the country’s official cash interest rate has remained steady since May, John Kolenda, director of mortgage broking network 1300HomeLoan, said it doesn’t come at a shock that banks are moving their interest rates out of cycle.

“While the RBA's cash rate has stayed at a record low of 2% since May and there are expectations of further interest rate relief before the end of the year, the central bank's decisions are rapidly becoming redundant,” Kolenda said.

“Westpac is the first to raise rates out of cycle and other lenders are likely to follow suit,” he said.

Kolenda said the changed capital requirements for the banks, which come from the Australian Prudential Regulation Authority (APRA), would help to make Australia’s banks some of the strongest in the world, but they also mean future rate cuts by the RBA are unlikely to be passed on by lenders.

Sam Saggers, chief executive officer of Positive Real Estate, believes Westpac’s decision was also likely in part due to the size of their mortgage book.

“The banks have been forced into restricting lending as a result of the rampant growth, particularly in the Sydney market,” Saggers said.

“Westpac has more exposure to the residential property market than the other major banks, therefore they are the first bank to act as a result of these changes,” he said.

While speculation is continuing to mount about the future of Sydney’s property market, Saggers believes Westpac’s decision is a sign investors in the city should take notice of.

“The dynamics of the Sydney market have changed, things should start to cool and slow down, which is much needed. Investors should lock in their equity now, as we may have just seen the peak of the market,” he said.

“Locked in equity can be kept in an offset account and be used to reinvest elsewhere. Smart investors are migrating their new equity to Brisbane and Melbourne, where the property market is less affected by the affordability issues that Sydney faces.”