Major bank slashes interest rates

ANZ has slashed its fixed rates.

One of the major banks has made a power move ahead of the next Reserve Bank meeting to decide the cash rate, introducing new offers to entice more mortgage applicants to fix their loans.

ANZ this week announced it would be slashing 10-35 basis points off one to five-year fixed home loan rates, a move that has meant it offers the cheapest fixed rates among the “big four”.

It’s come as lending data shows few customers are choosing to fix rates amid wide expectations of another cash rate cut in July, followed by subsequent cuts later this year.

This means most of the homeowners on variable rates have the power to chase the best deals in the market by refinancing to different lenders.

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Expectations are running high that RBA Governor Michele Bullock will announce a cash rate cut next week. Picture: NewsWire / Nikki Short

ANZ’s cheapest fixed rates are now 5.29 per cent and 5.19 per cent for one-year and two-year fixed terms, respectively.

The move has occurred after a range of smaller lenders earlier slashed their fixed rates to just under 5 per cent.

This included Pacific Mortgage Group, which is offering 4.99 per cent for one-year fixed terms, while Easy Street is offering 4.95 per cent for two-year fixed loans, according to Mozo analysis. Variable rates for new customers currently average about 5.74 per cent.

Mozo finance expert Rachel Wastell said ANZ’s fixed rate offers were likely a “strategic first-mover play”.

“ANZ is getting ahead of the curve to lock in borrowers who might be contemplating a fixed rate before the RBA acts,” she said.

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“Inflation data has also shifted expectations and the market now sees rate cuts as more imminent, so ANZ could be capitalising on that shift before the RBA confirms direction.

“By slicing just enough to undercut the other majors, ANZ gets to look competitive without actually joining the below 5 per cent pack. So it could also be a positioning move, just as much as a pricing one.”

Canstar data insights director Sally Tindall said ANZ was moving on the assumption more cash rate cuts were imminent.

“This move by ANZ consolidates its lead as the lowest-cost fixed rate lender out of the majors,” she said.

“The bank is factoring in the possibility of further cash rate cuts, which could be coming down the line as soon as next week.”

Ms Tindall added that customers were rarely choosing fixed rates.

The prospect of more rate cuts has been encouraging home buyer demand. Picture: Sam Ruttyn

Canstar research director Sally Tindall. Picture: Tim Hunter.

“ANZ could also be looking to shore up its loan book by locking in more customers on fixed rate deals,” she said.

“The bank’s most recent half year results show that just 3 per cent of its residential mortgage book is on a fixed rate contract.

“This means the remaining 97 per cent on variable rates are free to move at any time without major penalties.”

Ms Tindall said homeowners considering fixing their rates should keep some perspective.

“While ANZ’s fixed rates are streaks ahead of the other big banks, particularly on shorter terms, they’re still a far cry from the lowest fixed rates in town, with a total of 13 different lenders now offering at least one fixed rate under 5 per cent,” she said.

“If you’re looking to lock in your rate, don’t go aiming for one that starts with a 5 or a 6. You should be looking in the 4’s.”

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