ANZ raise their rates, but lower their standing

Wow.   At 5:18pm on a Friday afternoon, ANZ announced the result of their April interest rate review:  another increase of 0.06% in variable home loan rates and small business lending rates.  This is in the face of significant public anger, mounting political pressure, intense media scrutiny and the strong likelihood of an RBA cut in a couple of weeks.

In recent years, normal bank practice would have been to wear any cost pressures until that next RBA move.  But ANZ really is determined to bust that connection between the RBA rate and their home loan rates.

Their announcement quotes continuing pressure on funding costs as the reason, particular for term deposits.

But it also talks at some length about how they have considered their customers:

  • they waited until they were sure the cost increases were sustained before passing them on;
  • they have paced out the increases – 6 basis points in February and another 6 now;
  • they are the only bank with a transparent process for reviewing rates
  • their rates haven’t gone up relative to the market since they broke from the RBA timetable

All of these are true.  But sadly for ANZ, I don’t think their customers will be listening to those sorts of arguments.  Customer sentiment scores collected by Mozo over recent months clearly shows the Big4 falling further behind smaller home lenders, and ANZ in particular, mostly centred around early February when the ANZ last made a unilateral move.  Customers see them putting prices up, seemingly at will.  They feel powerless.  And worse, they don’t believe for a moment that the banks care.

And I have to say that to make an announcement after 5pm on a Friday, on an issue as sensitive as this, is a very questionable choice.  It will not help how people view ANZ, or the big banks in general.

Andrew Duncanson is the Research & Insights Director at

ANZ raise their rates, but lower their standing was last modified: June 29, 2015 by Andrew Duncanson

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  1. Did the pressure on funding costs reduce from April to May, if this was the case they should be dropping their rates based on that alone and not what the RBA might do.

    The CEO at ANZ makes mention the RBA decision has “impacted domestic funding sources”, does this mean the cost of money has become cheaper just beacase the RBA has lowered it’s rate? I think not.

    1. Andrew Duncanson
      Andrew Duncanson · Edit

      I’m pretty sure that the banks are not collectively lying to us when they talk about how their funding costs are changing. It’s an oligopoly for sure, but not a conspiracy.

      The main impact on domestic funding sources since the RBA cut has been the extent to which banks have cut their interest rates on term deposits and savings accounts. And the leading rates did not come down by the full 0.50%, so that means that the cost of domestic funds hasn’t fallen as far as the RBA rate did. Then of course you have the whole overseas funding issue, which behaves quite differently again.

      I actually think we do ourselves a disservice by concentrating so much on funding costs. The question I like to ask is, given whatever funding costs there are, are the banks fairly balancing the interests of customers with those of shareholders? Should shareholders expect to get the same rate of return in bad times, as they get in the good times?

      And, more practically, can you get a better deal down the road? Mozo’s home loans data certainly says that you can, with over 100 loans cheaper than the cheapest Big 4 loan.


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