Mozo Money Moves: ANZ shifts focus as Term Deposits drop and a fixed rate starting with 4 pops up

This week’s Mozo Money Moves dives into the first online savings rate cut from a Big Four bank since November last year, the arrival of the lowest fixed home loan rate in over a year - that starts with 4 - and a flurry of term deposit rate cuts coming through the Mozo database.

Plus, we share our latest analysis on how much debt Australians have, and which debts borrowers should be prioritising to reduce the amount of overall interest they pay.

ANZ cuts savings rates, shifting focus to ANZ Plus

Today, ANZ cut the base rate on its online saver product, following the cuts ANZ made to term deposits last month. This marks the first online savings rate change by a big four bank since the last RBA cash rate hike in November. 

This change was modest, and has not impacted the maximum savings rate customers can achieve, but is notable, as it seems ANZ is shifting focus to promoting ANZ Plus products rather than its traditional offering.

“ANZ’s latest rate cut appears to be a strategic move to attract more customers to their ANZ Plus products,” says Rachel Wastell, Mozo’s personal finance expert. 

“With over a one percent difference between the rates on standard ANZ savings accounts and ANZ Plus, it seems clear ANZ is trying to incentivise customers to switch to their digital brand.” 

“The approach is likely aimed at boosting account growth and engagement with younger generations, positioning their digital offering as the top choice for savers seeking higher returns.”

ANZ cut the base rate of its Online Saver product from 1.50% to 1.40% p.a., but hiked the introductory bonus rate on the same product from 2.15% to 2.25% p.a., so the total maximum rate of 3.65% p.a. for customers has not changed.

This change now makes the ANZ Plus savings rates look much more attractive. The new ANZ Plus Flex Saver product launching 1 October 2024, offers a 5.00% p.a. base rate, with no minimum deposit amounts for savers with balances up to $5,000. The new ANZ Plus Save offer which also launches on 1 October 2024 will have a high 5.00% p.a. rate (4.50% p.a. bonus rate +0.50% p.a. base rate), however this does require account holders to grow their balance by $100 a month, and reverts to a 0.50% p.a. base rate if conditions are not met. 

Are fixed rates starting with 4 making a comeback?

ANZ’s cut may also signal an impending adjustment to their fixed-rate home loans, following on from the three other Big Four Banks cutting fixed rates in the past few months. ANZ has not cut their fixed rate home loans since September 2023, however NAB, Commbank and Westpac have all made significant cuts since NAB started the Big Four cutting trend in July.

A cut from ANZ would align with the wave of fixed rate cuts that have come through the Mozo database since the beginning of September. It would also align with the growing consensus that the next cash rate cut from the Reserve Bank of Australia (RBA) will occur within the next 6-12 months.

On Thursday, South West Slopes (SWS) Bank unveiled the lowest 3-year fixed-rate home loan since June 2023, offering a rate of 4.99% p.a. (6.15% p.a. comparison rate^). SWSbank’s new offer comes in 1.17% lower than the average 3-year fixed rate in the Mozo database – 6.16% p.a.†. 

This competitive rate surpasses previous leaders and reflects a broader trend of lenders adjusting their rates in anticipation of potential cash rate cuts by the Reserve Bank of Australia (RBA). 

Other fixed rate cuts on the Mozo database this week included Credit Union SA’s 10-25 bps cuts to 2 and 3 year terms, and Bank of Queensland’s 5-15bps cuts to 3,4, and 5 year terms.

^WARNING: 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. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

†Average fixed rate in the Mozo database, for an owner-occupied home loan at $400k, making principal and interest repayments, with <80% LVR. Correct as at 11 September 2024.v

139 Term Deposit cuts in 13 days

Since the beginning of September on the Mozo database, a whopping 139 term deposit rate cuts have occurred, compared to just 37 increases. The focus of those cuts seems to be on the longer terms, with 21 cuts to 12 month term deposit rates, 12 cuts to 2-year term deposit rates and 22 cuts on terms between 3-5 years. However, there have also been 41 cuts to shorter term deposit rates between 4-6 months.

"Term deposit rates are often a telltale sign of where banks expect interest rates to head, and with recent indicators pointing to a significant softening and slowdown in economic growth, it seems banks are gearing up for several RBA rate cuts over the coming year.”

“The flurry of cuts to term deposit rates we’ve seen on the Mozo database, particularly that focus on cuts to 12 month term deposit rates, reflects our view that another RBA rate hike is unlikely and a cut could come as early as Commbank is expecting, which is in November of this year.”

Term Deposit Rate Cuts in September so far

Mozo analysis: How much debt do Australians have?

This week, Mozo also conducted an in-depth analysis of Australian household debt, highlighting the growing financial strain across mortgages, credit cards, and personal loans. 

Mozo’s analysis of the latest Australian Bureau of Statistics (ABS) Lending Indicators data showed the average mortgage for new home loan borrowers surged to $640,998. Based on the average variable rate of 6.80% as per Mozo database in July 2024 for owner occupiers paying principal and interest,  the monthly home loan repayment on that loan size is $4,445. 

Loan sizes and repayment amounts varied across states, with New South Wales leading the charge, where the average mortgage hit $782,916, equating to a monthly repayment of $5,429 using the same interest rate scenario as above.

No matter where you live in Australia, buying property is expensive, as even the lowest home loan size, found in Tasmania at $443,704, still results in a significant monthly repayment of $3,077 based on the average variable rates on the Mozo database.

Rising Home Loan Sizes & Repayments

Mozo also looked into consumer debt, as credit cards, Buy Now, Pay Later (BNPL) services and personal loans can become a key concern if not managed properly. 

According to the latest RBA retail payments data for July, released on Monday, the average credit card balance sits at $2,869, with interest-accruing balances around $1,537. While recent research from Mozo showed that Aussies are becoming savvier with credit card spending, this debt often carries to highest interest rates, and consumers need to be careful not to get caught in a debt cycle, paying double digit interest on outstanding balances. 

BNPL debt is also a concern, despite being advertised as “interest free” as the money needed for BNPL repayments could mean consumers are living beyond their means. Recent Mozo research* showed the average BNPL user owes $919, while those juggling both BNPL and credit cards average $1,059 in outstanding debt. 

In the realm of personal loans, Mozo analysis of the latest ABS Lending Indicators data and ABS National Accounts data revealed the total value of new personal fixed-term loans, excluding refinancing, stands at $2.7 billion. 

Breaking it down further, loans for travel and holidays total $53 million, while personal investment loans amount to $497 million and margin loans account for $227 million.

BNPL Debt

*Based on a nationally representative consumer research survey via Researchify, surveying 2,554 Australians, aged 18 years and over, from 12th January to 2nd February 2024.

When looking at debt overall, and the impact that has on consumers, Mozo’s personal finance expert, Rachel Wastell warns higher-interest consumer debts like credit cards are more likely to strain household budgets. 

“Mortgages are typically long-term, lower-interest debts, which allow borrowers to gain access to what’s known as an appreciating asset - that is, the asset you are investing in is likely to increase in value over time,” explains Wastell.  

“As you pay down your mortgage, you build equity, which can give you financial stability and leverage in the future, whether that’s through selling the property for a profit or refinancing.” 

“However, just like other forms of financing, home loans can be risky if rates rise significantly, as they have over the past two years. If you over-exert yourself financially and can’t afford to meet repayments, or if you buy a property that doesn’t increase - or drops - in value, you could end up in deep water.”

"Austrlaians looking to pay down debt should look to prioritise high-interest debt repayments  first, as that can make a big difference to the amount of interest you pay overall.”

Debt insights:

• Mozo money writer Gabriella Margerison shares six crucial money lessons she wishes she had known in her 20s, to help Aussies better manage their finances and their debt
• Paying off your mortgage ahead of time can feel like a daunting task, but there are ways to pay down your home loan faster – and doing so can also save you thousands.
• Whether you’re just starting out or a seasoned personal finance pro, avoiding these common finance mistakes can help you keep more of your hard-earned cash.

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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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