ANZ slashes variable mortgage rates by up to 90bps

Australia And New Zealand Banking Group (NZX:ANZ, ASX:ANZ) is the first bank to slash variable mortgage interest rates in 2021.

ANZ has cut off up to 0.9% from its variable rate home loans and altered its package discount structure on April 19. The bank brought the new rate on its Breakfree Standard variable loan down to 2.99%.

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Mortgage rates are majorly significant for homebuyers who want to finance their new home with a mortgage loan. Every loan carries a certain interest (fixed or variable), which has to be paid by the borrower. A variable mortgage rate puts a floating rate on a part or all of the loan’s term instead of a fixed interest rate throughout.

Variable mortgage interest rates usually have smaller fees if a person needs to pay off the debt for some reason, such as refinancing or selling a home, and they usually bring more repayment choices and the ability to make additional repayments.

The previous rates offered by ANZ were structured by loan value, ranging from 3.89% for loans between A$150,000 and A$249,000 to 3.49% for loans of A$500,000 or more.

The new rate is 2.99% on all loan amounts, and it is only valid on loans with loan-to-value levels of less than 80%. Existing borrowers would not be affected by the new fee.

The variable rates are higher for other 3 banks. The variable rate of Westpac Banking Corporation (NZX:WBC, ASX:WBC) on a similar product is 3.19%.

RBNZ not convinced of loan rates

RBNZ believes that lenders are not doing enough on their part to reduce rates. RBNZ kept its OCR unchanged at 0.25% in its latest monetary policy with continuation of its bond-buying programme LSAP and Funding for Lending Programme (FLP) for banks.

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The Reserve Bank had asked lenders to trickle down cheap funding due to partly relieved borrowers facing financial crunch because of COVID-19.

ASB economist Chris Tennent-Brown believes that with surging house prices and NZ economy on a path to recovery, banks feel lesser need to tap into FLP. The Programme could have had a bigger impact if the economy underwent another soft patch.

He also warned that mortgage borrowers must brace up for higher interest rates in the next 2 years.