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ANZ Cuts Interest Rates By 0.27%

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Well played, ANZ.

After three of the big four banks passed on the Reserve Bank’s 25 basis point rate cut to customers earlier this week, ANZ Bank has exceeded everybody’s expectations by cutting its own standard variable rate by 0.27 percentage points.

The cut means that ANZ’s standard variable rate will be 6.13 per cent from next Friday May 17, which is equal to the rates offered by competitor NAB. Variable rates for ANZ’s small business lending will also decrease by 0.25% per annum from next Friday.

Today’s surprise 0.27% reduction is the first time a major bank has slashed its interest rates further than RBA rate cuts since 1997.

ANZ has announced that the cut was due to a fall in funding costs for the bank, with Australian chief executive Phil Chronican declaring it great news for ANZ customers.

“While competition for deposits remains strong, our overall funding cost position has allowed us to reduce variable mortgage rates by 0.27 per cent per annum.

“This decision reflects ANZ’s approach to reviewing retail lending rates each month which includes an assessment of our overall funding costs, and I’m pleased our mortgage customers will see a benefit this month.”

Phil Chronican, Chief Executive Officer, ANZ Australia

ANZ customers with an average home loan of $280,000 will save around $60 each month thanks to the interest rate reduction.

Until today, NAB has enjoyed having the lowest mortgage rate of the big Aussie banks for almost four years, with 46 consecutive months as the cheapest. However, this latest move by ANZ is a clear bid to undermine NAB’s strategy to maintain the lowest advertised mortgage rates and set itself apart from the other big banks.

ANZ has announced previously its intentions to review lending interest rates each month, and to separate its own pricing decisions from those of the Reserve Bank. ANZ hinted last November that this approach may result in decisions that surpass RBA rate cuts.

Today’s announcement will shine a further spotlight on competing institutions that decide to hold back full rate cuts from customers in the future. The major banks have been under increased pressure to start passing on full RBA rate cuts to their customers, as lowered international funding costs and increasing profits have caused the public to lose patience with the banks’ ‘times are tough’ defence.

To review, here are the new standard variable rates for the major banks:

If today’s rate cut announcements have you thinking about buying a home  - or you’re considering refinancing your current mortgage – you can compare interest rates here.


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