Rate rise, what rate rise? ANZ offers new customers a good deal

Less than a fortnight after following the Reserve Bank’s first hike since 2010 and increasing its rates by 0.25 percentage points, ANZ has cut its lowest variable rate down to 2.29 per cent – but only for its newest customers.

In a sign competition remains tight among the nation’s four largest lenders, the bank lower the rate on its Simplicity Plus product by 15 per cent, putting it below its three major competitors.

Westpac is giving its customers a two-year honeymoon rate of 2.09 per cent, after which it increased by 0.40 percentage points.

The Commonwealth Bank’s new Unloan product, launched only last week, is offering a starting variable rate of 2.14 per cent.

“What these big bank cuts show is that competition in the mortgage market is still alive and kicking, despite the RBA hikes,” said Sally Tindall, research director at consumer website RateCity.

“While most variable customers will now be dealing with higher repayments, some banks eager for new business are handing out exemptions,” Ms Tindall said.

“If you’re on a variable rate that’s on the rise, don’t just accept your fate. Get yourself a rate cut by switching to a lender willing to put a competitive price tag on your business.”

Earlier this month, ANZ chief executive Shayne

Elliott said rising interest rates over the next 12 months could increase the bank’s revenues by $800m – and push them $2.3bn over three years.

“It shouldn’t be the shock that many people will worry about,” he said. “The amount of money people will have to spend on a house will moderate or go down, and house prices could potentially fall a little bit,” Mr Elliott said at the time, adding 70 per cent of customers were ahead in payments.

ANZ flags end of investment drought | Banks move to lift deposit rates | Aggressive RBA cranks up bank risks: analysts | Watch for a bigger hike in June: Westpac’s Evans

On Monday, Goldman Sachs analyst Andrew Lyons said major bank net interest margins had troughed in the first half of 2021 and will begin to rise this year “supported by higher rates and the impact of less lower margin fixed rate mortgages”.

“On volumes, we expect both system housing and business loan growth to experience a slowdown but overall remain elevated relative to pre-covid levels,” Mr Lyons told clients in a note.

“We continue to see costs as a key determinant of relative sector performance particularly in light of inflationary pressures and higher investment spend.”

Goldman Sachs is assuming the RBA increases the cash rate to 2.75 per cent by March 2025, with Mr Lyons noting his preferred option was National Australia Bank.

“We continue to see costs as a key determinant of relative sector performance particularly in light of inflationary pressures and higher investment spend,” he wrote.

“We continue to see costs as a key determinant of relative sector performance particularly in light of inflationary pressures and higher investment spend.”

But competition is also shifting away from rates and to speed of approvals. The Unloan platform is attempting to process applications in 10 minutes and targeting the refinancing market. ANZ’s home loan business is benefiting from investment in processing capacity, with turnaround times now comparable to competitors, the bank said this month.