ANZ became the first big bank on the market to lower interest rates on floating-rate mortgage products (for new customers). In order to gain business in an increasingly competitive market, banks are now trying to do everything they can.
While banks, including CBA, have cut interest rates on fixed-rate loans and have offered "honeymoon concessions" in recent weeks, ANZ was the first bank to cut interest rates for floating-rate products.
And the cut comes as credit institutions generally face upward pressure on interest rates, as the cost of financing is rising, especially for smaller institutions.
The ANZ has informed loan brokers to cut the base interest rate on home-based debt-service loans by 0.34 percentage points to 3.65 percent.
ANZ`s offer applies only to new customers whose loan limits do not exceed 80% of the property value.
The interest rate on loans above 80% of the property value remained unchanged at 3.99%.
Non-bank lenders rapidly expand market share
The ANZ`s move comes against the backdrop that small lenders are eroding market share of the big four banks.
While non-bank lenders account for less than 8 percent of the mortgage market, their mortgage business has grown by about 14 percent over the past year, while the big four are growing at a record low of just over 1 percent.
Sally Tindall, head of research at Ratecity, a mortgage-pricing website, said the move by ANZ was unexpected at a time when the trend was to raise interest rates.
"this shows that banks are trying to get new customers because non-bank credit institutions are threatening their market share," Ms. Tindall said.
"at a time when the market expected ANZ to raise interest rates rather than cut them, it cut interest rates. And the Royal Commission has upended the market environment. "
Large banks in the market offer lower, but usually so-called "honeymoon offers," which are significantly higher after about two years of loan approval, in the case of fixed-rate products, four years later.
Ms. Tindall said the other three big banks could be under pressure to follow ANZ`s cut in interest rates, or else they could lose further market share.
A deliberate cut in interest rates
Brett Le Mesurier, an analyst at Shaw and Partners Bank, said ANZ`s move had been carefully considered.
"I was surprised by the rate cut in ANZ," Mr. Le Mesurier said. "but ANZ has been looking to stay in the homeowner market and relatively avoid the investment market-most of their lending growth comes from Australian-wide home loans."
He said there was no doubt that the difference in interest rates between home and investment loans was likely to increase.
"Banks are now focusing on home loans that lend less than 80 percent of the value of their homes, probably because they expect less capital spending associated with such loans," he said.
