Has ANZ cut interest rates after the October cash rate change?

In the wake of the Reserve Bank’s decision to slash the cash rate to 0.75%, all four of the nation’s biggest banks have now cut their home loan interest rates. How much did ANZ reduce its rates?

This afternoon, ANZ announced it would “decrease all variable interest home loan rates in Australia by between 0.14% and 0.25%”, effective 11 October, 2019. The bank also cut some fixed rate loans, effective 3 October. One of the loans even set a new record as the lowest home loan rate ANZ has ever offered.

ANZ’s post-cash rate reduction home loan rates include:

  • Owner-occupier, principal and interest standard variable rate home loan: The Index Rate* will be reduced by 0.14 percentage points to 4.79% (comparison rate 4.89%).
  • Investor, interest only standard variable rate home loan: The Index Rate* will be reduced by 0.25 percentage points to 5.74% (comparison rate 5.63%).
  • ANZ Breakfree Package, owner-occupier principal and interest two- and three-year fixed rate loans: Reduced 0.2 and 0.3 percentage points respectively, to 2.98% (comparison rates 4.45% and 4.35%).
  • ANZ Breakfree Package, investor, interest only two- and three-year fixed rate loans: Reduced 0.1 and 0.2 percentage points respectively, to 3.49% (comparison rates 5.01% and 4.89%).

*Index rate: The advertised rate on a standard loan. Package home loan rates could be different to this rate, due to discounts. 

 

ANZ’s Retail and Commercial Australia Group Executive Mark Hand said the reductions were a “considered decision balancing the needs of our customers in a low rate environment as well the performance of our business and our role in stimulating the economy”.

“We were able to match the full rate reduction in July and the majority in June, however the dynamics of record low interest rates has resulted in a reduction in variable home lending rates of between 0.14% and 0.25% this time around,” Mr Hand said.

“While we recognise many customers will use this as an opportunity to pay down their existing home loans faster, we hope this provides the economic stimulus the Reserve Bank is wanting to generate.

“We have also announced a new fixed rate of 2.98% for home owners paying principal and interest with either two or three year terms available from tomorrow. This is the lowest residential rate on record for ANZ.”

Commonwealth Bank was the first of the majors to announce a move yesterday, dropping its standard variable rate for owner-occupiers paying principal and interest (P&I) by 0.13 percentage points. Soon after, National Australia Bank cut some of its variable home loan products by 0.15 percentage points for owner-occupiers, and up to 0.3 percentage points for investors. Earlier today, Westpac reduced its rates by 0.15 percentage points, effective 16 October, 2019.

Will other banks will pass on the full cash rate cut?

After the cut, Australian Treasurer Josh Frydenberg said it was “the Government’s expectation that the banks will pass on this 25 basis point rate cut in full”.

“What this means for an Australian family with a mortgage of $400,000 is $720 less a year in interest payments,” Mr Frydenberg said. “That’s a significant benefit to an Australian family.”

Financial institutions look to the cash rate as a guide to setting interest rates on a range of products including home loans and savings accounts, meaning a change to the cash rate by the RBA typically sets off a chain reaction across the banking sector. October’s decision proved to be no exception, as it was soon followed by a flurry of public announcements about home loan interest rate reductions.

It was smaller lenders who were the first cabs off the rank, with Athena and Homestar announcing they would pass on the full cash rate cut to their customers. Our database shows that other lenders such as Reduce Home Loans, Endeavour Mutual Bank and Freedom Lend have also lowered interest rates since the cash rate cut.

In the months since the RBA cut the cash rate in June this year – for the first time in three years – Canstar has noticed a slew of lenders react by lowering variable home loan rates. Fixed rates have also dropped significantly, thanks in part to the lower price banks have been paying for longer-term funding.

There have been more than 1,700 mortgage rate cuts since that first cash rate cut on 4 June, with variable loans falling by an average of 0.45 percentage points and fixed loans by 0.51 percentage points (at the time of writing), according to Canstar’s home loan database.

Canstar finance expert Steve Mickenbecker said he expected most banks wouldn’t pass on yesterday’s full 0.25 percentage point cut.

“With their profit margins under pressure from low rates, the cut is likely to be between 0.15% and 0.20% for borrowers,” he said.

Mr Mickenbecker said it was a wise idea to shop around for the best deal on home loans – as well as savings products, many of which had suffered a cut to their interest rates in tandem with the cash rate reductions.

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