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ANZ borrowers slugged with new round of rate increases
Australian Financial Review Jun 9 2017 7:38 PM
Duncan Hughes, Angus Grigg
ANZ is trying to shift more customers away from interest-only loans as it lifted rates for investors while making a small cut for principal and interest borrowers.
"We want to encourage customers to move away from interest-only loans," said ANZ chief executive Shayne Elliott during an interview in Shanghai.
Mr Elliott said the main way to do this was through the pricing of loans, and the bank had therefore made it more expensive for those paying just interest and cut rates for those paying off some principal.
"Before these changes the difference for owner occupiers paying principle or interest only was just 20 basis points and for an investor it was only 11 [basis points]," he said.
"That was not enough of an incentive to make people shift [to paying principle and some interest] and so now it's more like 50 basis points and we think that will provide more incentive for people to move to principle and interest."
He said ANZ was on track to meet the regulator's target of bringing down interest-only loans to 30 per cent of overall lending by the end of this year, down from more than 40 per cent during the most recent peak.
"It takes time to slow but [we] will get there by the end of the year," Mr Elliott said.
Mr Elliott said around 17 per cent of ANZ's owner-occupier customers paid interest only on their home loan, while this was the case for the majority of investors.
Owner-occupier and investor principal and interest are reduced by 5 basis points to 5.20 per cent and 5.80 per cent respectively.
Owner-occupier and investor interest-only are increased by 30 basis points to 5.75 per cent and 6.26 per cent respectively.
In April it also announced a two-tiered response to regulatory pressure to slow lending by slugging most interest-only investors with increases of up to 40 basis points but lowering costs for principal and interest borrowers.
"This is not in response to the recently announced bank levy and we are still to determine the final impact," said group executive Fred Ohlsson.
"We do recognise the work regulators are doing to manage the growth of both investor and interest-only loans and will continue to be transparent on the impact this will have on how we structure and price our home loan products," he said.
Mortgage brokers, such as Christopher Foster-Ramsay, principal of Foster Ramsay Finance, warn the gap between interest-only and principal and interest will continue to widen.
Mr Foster-Ramsay estimates it is likely to be around 100 basis points by September.
In a separate move, Suncorp is also announcing increases of up to 12 basis points on standard variable and some fixed-term investment loans.
