Mozo Money Moves: Banking giants merge and personal loans take a hit

Welcome back to another bumper edition of Mozo Money Moves, where we dive into the latest developments shaking up the personal finance landscape.

This week, we review a major bank merger that has been officially confirmed to take place at the end of the month, take a closer look at changes to unsecured personal loans, and discuss the latest Lending Indicators data.

Banking Moves

This week, ANZ announced that the Queensland State Financial Institutions and Metway Merger Amendment Act has officially enabled ANZ to complete its acquisition of Suncorp Bank by 31 July 2024. 

This significant move will bring 3,000 employees and 1.2 million customers under ANZ starting 1 August 2024. Approved by the Federal Treasurer on 28 June 2024 and authorised by the Australian Competition Tribunal on 20 February 2024, it marks a major consolidation in the banking sector, reminiscent of the Commbank and Bankwest merger that occurred back in 2008 .

Rachel Wastell, Mozo's personal finance expert, drew comparisons to the Commbank and Bankwest merger and suggested that this acquisition might end up shifting Suncorp rates.

"Looking ahead, I will be keeping an eye on Suncorp and ANZ rates, as I believe we may start to see Suncorp’s offers more closely mirror ANZ’s. Currently, Suncorp’s leading mortgage rate is notably lower than ANZ’s but on par with ANZ Plus. In savings, Suncorp’s leading bonus rate is much higher than ANZ’s and the leading savings rate offered by ANZ Plus. 

“With ANZ's significant investment in acquiring Suncorp, it is likely the offerings will align over time. Just look at the Commonwealth Bank and Bankwest merger. Bankwest initially had very competitive rates, but over the years, that competitiveness has diminished. We could see a similar trend with Suncorp." 

Comparing ANZ and Suncorp Leading Rates

Home Loan Rates

Savings Rates

Wastell advises existing Suncorp customers to stay vigilant, and keep an eye on their home loans and savings rates for any changes.

"It's crucial for existing Suncorp customers to stay vigilant about their interest rates to ensure they remain competitive in comparison to others in the market, especially mortgage rates.

“When the RBA does end up cutting rates either late this year or early next, we may see that the Suncorp cuts are not as substantial as ANZ’s."

Home Loan Moves

This week saw modest movements in interest rates on home loans from credit unions and regional lenders, but the market remained relatively quiet.

Police Credit Union, BOQ, and ME hiked various fixed rates between 5-20bps, Australian Unity increased a number of variable rates, and Gateway Bank reduced several variable rates by 10-19bps. 

This week also brought the release of the much anticipated Lending Indicators for May 2024 , which showed the total value of new housing loans dropped 1.7% to $28.8 billion.

This monthly decline however must be viewed in context, as over the past year there has been an 18% increase in new home loan commitments, so the trend is still up, with a substantial increase in the investor space. 

The total value of commitments for owner occupier housing is up 12.2% year-on-year, while investor loan commitments have jumped by a whopping 29.5%. As you can see in the below graph, the value of new commitments for investor loans was driven predominantly by increased investment activity in Queensland.

Investor Loan Commitments (State by State)

Reflecting on April lending indicators data, which showed a 4.8% month-on-month surge in new housing loan commitments for both owner occupiers and investors, it’s evident that while values have dipped in May, they continue to reflect a broader upward trend. 

"May saw a slight downturn in housing loan values, but there's no need to panic," says Wastell.

"When you look at the 18% annual increase in home loan commitments over the past year, you can see that this monthly dip does not undermine the resilience of Australia’s housing market, and the broader overall growth."

"For first-time buyers, navigating housing supply constraints, rising property prices and subsequent larger loan sizes occurring due to the growth in the market can be daunting.” 

“However, for mortgage holders, this upward trend signifies potential for increased equity, and for property investors there’s the potential for greater capital appreciation and steady rental income."

If you are a first time buyer looking for a competitive rate, there are still 19 lenders on the Mozo database offering variable owner occupier rates starting with 5 for first home buyers with at least a 20% deposit.

Lowest Variable Rate Home Loans

Leading Fixed Rate Home Loans by term

Home Loan Insights

• To see a breakdown between fixed and variable home loan interest rates, average mortgage sizes, and the split between borrower types, check out Mozo’s home loan statistics page here.
• Managing Editor JP Pelosi shares his thoughts on how Winter’s home auction slowdown can offer a window of opportunity for property buyers.
• Taking out a home loan will be the biggest financial decision many can expect to make, so what is the average mortgage size in Australia?

Personal Loan Moves

In the personal loan space, the lending indicators for May showed a slight drop with a marginal 0.7% decrease to $2.6 billion in May. However, there was a strong annual rise in fixed term personal loans, up 12.7% year-on-year, as consumers take on debt to afford the rising cost of living. 

The growing popularity of Buy Now Pay Later (BNPL) financing in this space also suggests that personal borrowing trends could be even more pronounced, but this will depend on the outcome of reporting adjustments noted by the Australian Bureau of Statistics (ABS). 

The ABS highlighted inconsistencies in BNPL loan reporting, prompting collaboration with APRA, the Reserve Bank, and lenders to ensure data accuracy and alignment with reporting standards. 

"The surge in BNPL is fundamentally reshaping consumer borrowing habits, steering preferences away from traditional personal loans," says Wastell.

"In today's economic climate, borrowers face heightened financial risks, prompting lenders to scrutinise the risk-reward balance of smaller loans and respond with rate hikes.” 

Recent increases to unsecured personal loan rates on the Mozo database reflect this shift, with some smaller lenders increasing their starting rates by up to 400 basis points in the past month.

“In a higher for longer rate environment, compounded by BNPL competition, banks are revising pricing strategies on personal loans.”

“Compared to home loans which carry larger debt amounts and longer repayment periods, the profitability dynamics for personal loans are more challenging, with both smaller margins and higher risks."

Recent Unsecured Personal Loan Rate Hikes:

• Alex Bank: although a smaller player, the hikes from Alex Bank are worth noting. They applied a significant 1.75%p.a. increase to its 3 year fixed rate  on 12 June and another 2% hike on 3 July, taking their total increase over the past two months to 4%. The Personal Loan (Unsecured, Fixed) 3 year rate is now 12.74% (12.74% comparison rate*). 
• Great Southern Bank: increased its unsecured green personal loan (fixed) by 0.25% and its Unsecured personal loan (fixed) by 0.50% (9 June 2024)
• NAB: raised personal loan interest rates for both fixed and variable rate unsecured loans by 1.50% (29 May 2024)
• St.George Group: Including BankSA and Bank of Melbourne, raised unsecured personal loan rates by 0.60% (22 May 2024)
• Teachers Mutual Bank/Health Professionals/Firefighters Mutual/UniBank: hiked unsecured personal loans (fixed) by 0.24%  (22 May 2024)
• Community First Bank: raised its unsecured personal loan rate (fixed) by 1% (4 April 2024)
• Commonwealth Bank: increased its unsecured green personal loan rate (fixed) by 0.50% (14 Feb 2024)

Lowest Rate Unsecured Personal Loans

*WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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As a part of Mozo’s commitment to making your money count for more, each month we “roundup” the rate changes, key banking trends and money moves in the Australian personal finance market. 

If you’d like to see the analysis in full once it’s released, you can subscribe to receive the Mozo Banking RoundUp here.

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