ANZ rate drop for the debt reducers

A BANKING home loan interest rate war has begun after lending giant ANZ yesterday announced it was dropping its variable rate deals for customers paying down their debt.

The out-of-cycle rate fall is the first by the big four banks and is expected to see other lenders follow in their footsteps, intensifying competition and delivering customers better deals.

ANZ revealed it would reward owner-occupiers and investors paying principal and interest by giving them drops of 5 basis points on their variable rate loans. This would save the average borrower on a $300,000, 30-year home loan about $10 per month.

But interest-only customers continue to be slugged — ANZ said it would sting them with hikes of 30 basis points for both owner-occupiers and investors failing to chip into their debts. This will cost the average borrower an additional $900 per year.

Mortgage experts believe this is the start of a lending war which is tipped to see more banks follow and reward customers who are paying down their debts.

Home Loan Experts’ managing director Otto Dargan said ANZ’s decision to move variable rates “was a bold move and throws down the gauntlet to the other banks”.

“The fight is on over home loans with principal and interest repayments, and we’re already seeing a lot of underthe-table discounts from a range of lenders,’’ he said.

“We think the other banks will eventually follow suit.”

ANZ’s owner occupier principal and interest rate standard variable rate will fall to 5.2 per cent and will be the cheapest of the big four banks.

Interest-only investor loans will rise to 6.26 per cent and will be the highest among the big four.

The changes are effective from Friday of next week.