The housing market got a shock with ANZ raising its ANZ Plus variable home loan rate by 0.16 percentage point. This increase in the rate takes off for new customers at 5.75% per annum, starting immediately.
This is an unexpected move, especially when Wall Street traders expect the Reserve Bank of Australia to lower rates on August 12. In fact, nearly 20 other lenders have lowered their fixed mortgage offers in recent weeks to draw borrowers away.
The bank confirmed through the spokesperson: “The rate increase applies only to new ANZ Plus customers; hence current borrowers will not be affected.” The move coincides with the speculation that the RBA may undertake policy easing to remedy a slowing economy.
How does this affect Australia’s mortgage market?
Industry experts have seen the move by ANZ as one probably intended to protect its profit margins, in anticipation of rate cuts. Meanwhile, most banks, including NAB and Bank of Queensland, have lined up differently in the market.
NAB, for instance, has entered the fray among the big four by lowering its two-year fixed home loan rate to 5.19%. However, Bank of Queensland has gone a step further and dropped its two-year fixed rate to 4.89%.
In the wake of falling fixed rates, variable rates either remain steady or are rising for a few product types. The people have warned that repayment costs for new borrowers may actually increase in spite of the general easing trend.
ANZ lifts Trend
What are analysts saying about the RBA’s next move?
Economists widely expect the RBA to cut the official cash rate by 25 basis points next week.
This would take the rate down to 3.60%, marking the first reduction in more than two years.
Some forecasts, in fact, have contemplated more than one rate cut to be announced before the year-end should the rate of inflation keep falling.
However, the latest ANZ rate adjustment implies that the bank foresees continuing pressure on funding costs.
This stands in contrast to NAB’s much more aggressive fixed-rate cut, thereby signaling different risk assessments between the two major lenders.
ANZ takes a lone path in home lending
By an increase in rates, ANZ takes its stand against the prevailing tide in the industry, which was toward easing borrower costs.
In an unusual setting, it goes off on a tangent from major rivals who are trying hard to grasp mortgage market share.
Some market watchers see the move as short-term profit protection before cheaper rates become widespread.
The change could be indicative of a tilt toward select segments of customers in the bank through the ANZ Plus offering.
By constraining the rate hike to new customers, the bank appears intent on preserving relations with existing customers.
ANZ ASX Share Chare
Fixed-rate cuts dominate the broader landscape
While ANZ has increased new variable rates, the vast majority of lenders are cutting deep into their fixed rates.
More than a dozen banks introduced fixed rates below five percent over the last two weeks.
This is a sharp change from mid-2021, when nearly half of home loans were fixed.
In times of declining interest rates, variable rates are preferred by most borrowers, and currently, about 95 percent of loans are variable.
Demand for fixed rates is expected to become moderate as the RBA is about to start the cuts.
Also Read: Rates, Results and Resilience: Australian Finance Faces Global Shifts and Local Momentum
Borrowers face mixed signals in 2025
The housing loan market had been sending mixed signals as lenders prepared for the August RBA meeting.
New borrowers are faced with a choice: either accept the higher variable rates of ANZ or the lower fixed rates of other banks.
Such decisions would be tied to what they expected in terms of the speed of monetary easing over the next 18 months. For existing borrowers, the outlook remains cautiously optimistic on expectations that relief will be poured down upon them if the RBA actually takes a rate cut. However, the latest move by ANZ brings back the stark reminder that banks can be poles apart in how they follow any particular market trend.
