Mozo Banking Roundup April 2020

Peter Marshall

Friday 01 May 2020

In April, the country got to experience the true impact COVID-19 is having in the world of banking. Although the Reserve Bank decided to hold the official cash rate at 0.25%, fixed home loan rates still continued to fall. 

Interestingly, a range of lenders also began reducing their maximum loan to value ratios (LVRs), while rewards credit card owners were forced to come to terms with Virgin Australia entering voluntary administration. 

For a more detailed looked at what banking changes came about in the last 30 days, read on for our April 2020 edition of the Mozo Banking Roundup. 

Key facts 

Most Home Loan rate changes were made to fixed rates again this month, but the lowest for 1 to 3 year terms remains at 2.09%. Some lenders have moved to reduce maximum loan to value ratios.

COVID-19 and the impact of Virgin Australia’s troubles on the Velocity program have caused upheavals in the Credit Card market, with many cards either gone or closed to new applicants.

By contrast with other product categories, it was a very quiet month for Personal Loans, although one provider introduced some amazingly low rates.

It was another sea of red in April, and all but one of the major banks made further cuts to At Call Deposit rates including one dropping its headline ongoing bonus rate to just 0.50%!

There’s a new market leader for shorter Term Deposits as the previous leader gave up its position with some rate cuts, although the overall volume of cuts was lower than last month.

Home Loans 

As reported last month, the vast majority of home loan rates cuts are being applied to fixed rather than variable options. However the best 1 to 3 year rate is unmoved from last month at 2.09%, and one of the major banks moved to improve the competitiveness of its basic product.

Some lenders reduced the maximum loan to value ratio available to new borrowers for example IMB Bank reduced its maximum LVR of 95% to 90% and Tic:Toc will now only lend up to 80% LVR.

Variable Rates

Commonwealth Bank cut its most competitive basic home loan rate from 2.97% to 2.79% (2.80% comparison rate*), and relaxed the LVR from 70% to 80%, putting it more inline with the offerings from the other big banks. They did however increase the rate for borrowers with an LVR above 80% from 3.07% to 3.13% (3.14% comp rate) on this product.

A handful of lenders, which had not already done so in March, passed on a portion of the Reserve Bank cash rate cuts. These included: Bank of Queensland (17bp cut), bcu (25bp cut), Illawarra CU, (25bp), Kogan Money (25-30bp), Queensland Country Bank (25bp), Teachers Mutual Bank (25bp), UBank (25bp), Virgin Money (17-20bp) and Yard (-25bp).

Fixed Rates

ANZ cut between 19 and 59 basis points on its range of fixed home loan options. Its 3 year packaged fixed rate now available at 2.29% (3.89% comp rate*).

Auswide reduced its full fixed lending suite by 50 to 70 basis points.

Beyond Bank also sharpened its fixed offerings, cutting from 10 to 90 basis points. An owner occupied packaged 2 year fixed rate is now priced at 2.29% (3.81% comp rate*).

Heritage Bank was also among those that cut fixed rates, reducing selected terms by 15 to 30bp. Now 2.59% (4.42% comp rate*) for a 1, 2 or 3 year owner occupier packaged fixed rate.

Kogan Money made sizeable fixed cuts, reducing from 60 to as much as 174 bp across its whole range, now as low as 2.27% (3.14% comp rate*) for the 1, 2 and 3 year terms for owner occupiers.

RACQ Bank cut 50bp from all its fixed terms. 

Suncorp cut between 15 and 35bp on selected fixed terms, its lowest fixed rate now on offer a 2.29% for 2 years (3.32% comp rate*).

Virgin Money also cut most of its fixed rates, between 20 and 160bp. Its leading fixed offer now a 2.29% rate for 2 years, packaged (2.96% comp rate*).

*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.

Credit Cards

Virgin Australia's decision to go into voluntary administration has meant an unclear future for the Velocity Frequent Flyer program. While points are still being accrued, redemptions have been paused temporarily, and some card issuers have removed mention of the program as an option for redeeming points. Mozo’s database tracked 10 dedicated Velocity cards, and 7 have now been withdrawn from the market.

American Express withdrew its two dedicated Velocity cards - Velocity Platinum and Velocity Escape, ANZ withdrew its Rewards Travel Adventures Card, and Virgin Money paused new applications for its Virgin Australia Velocity Flyer and High Flyer Cards, and Westpac removed the Velocity option on its range of rewards cards.

Some banks have announced special arrangements to help out customers who may be struggling financially due to COVID-19 disruptions, but there have been a variety of approaches ranging from blanket changes to limited additional support.

NAB introduced a range of changes aimed at easing the financial burden on its customers. These included reducing the purchase rate on its Low Rate Card by 100bp to 12.99%, for all cards temporarily reducing the minimum monthly repayment to the greater of 0.5% of $5, and not charging late payment fees for at least 3 months. These changes apply automatically to all customers.

Westpac is offering relief for those financially affected by COVID-19 by pausing both repayments and interest charges for 3 months, but only for customers who apply for hardship assistance.

Commonwealth Bank has refunded any late fees and interest charges to all customers who missed making their minimum repayment in March, while ANZ suggests customers in financial hardship contact them to talk about options.

Also related to the uncertain economic times we are in are a range of providers temporarily pausing applications from new credit card customers. These include Jetstar (which launched a revamped card offering just last month), Macquarie, Woolworths, Myer and Greater Bank.

In other credit card news, two mutuals passed RBA cash rate cuts to their credit card customers this month, both reducing rates by the full 25bp. Heritage Bank now offers rates from 10.80%, and Queensland Country Bank cards are both now at 12.95%.

HSBC’s Platinum Qantas Credit Card is now offering 20,000 bonus Qantas Points for new customers who spend at least $3,000 in the first 90 days.

American Express cut the bonus points on its Qantas Ultimate card from 100,000 to 55,000.

Personal Loans 

Although there were very few changes to Personal Loans in April, one provider introduced the lowest rates we’ve ever seen, and a few others also acted to cut rates.

Australian Military Bank made some large rate cuts with its Car Loan rates now starting from just 3.60% (comparison rate 4.51%, for borrowers with excellent credit), its Unsecured Personal Loan from 4.85%, and its Unsecured Green Loan down at 3.15% (comparison rate 4.10%).

Bank First cut its unsecured overdraft rate by 25bp to 12.79%.

IMB Bank reduced the Personal Line of Credit rate by 1%, now 13.85%.

NAB ended the special application fee waiver for personal loans, returning to the previous fee of $150.

Qudos Bank reduced the rates on its Car Loan by 10bp to 6.19% (comparison rate 7.21%), and on its Qantas Points Car Loan by 30bp to 7.59% (comparison rate 7.80%). The Unsecured Personal Loan option was also reduced by 10bp, now 10.74% (comparison rate 11.79%).

Auswide Bank and Greater Bank reduced the maximum loan amounts for Unsecured Personal Loans. Auswide dropped from $50,000 to $30,000 and Greater Bank from $50,000 to $20,000.

At-Call Deposits 

At Call Deposit interest rates were hammered once again in April, a month where every rate change in the category was down. Only one of the four major banks refrained from cutting at call rates.

86 400 dropped both the ongoing bonus and base rates on its Save Account, now 1.85% and 0.25% respectively.

AMP had been offering the equal best introductory bonus rate at 2.65%, but now the headline rate on its Saver Account is 2.26% for the first 6 months.

ANZ’s Progress Saver ongoing bonus rate is now 1.00% after a cut of 25bp.

Commonwealth Bank already had the lowest ongoing bonus rate of 0.65% on its GoalSaver, but took that down even further with a drop of 15bp to be just 0.50% now.

The largest cut to an ongoing bonus rate was Easy Street’s Bonus Saver which was slashed by 70bp to 1.10%.

NAB cut 25bp off both the introductory rate on its iSaver, now 1.05%, and the ongoing bonus rate on its Reward Saver, now 1.10%.

UBank cut both its base and headline ongoing bonus rate by 25bp, now 1.60% and 0.54% respectively.

Up decreased its rates by 15bp with the ongoing bonus now at 1.85% and base rate now at 0.10%

Term Deposits 

While a far lower volume of cuts to term deposit rates than we recorded in March, April was another month where there was a clear direction for term deposit rates, with only a handful of increases.

ANZ reduced the majority of its terms 5 to 25bp, leaving its best rate, 1.35% for 8 months unchanged. Commonwealth Bank cut most terms 10bp, reserving a 40bp cut for its 1 year term (now 1.30%). NAB did not adjust its offerings in April. Westpac ended a 1.70% for 7 months special while adding a 1.20% for 12 months offer.

Largely across the board reductions were observed from a variety of institutions including: AMP (10-35bp), Bank Australia (10-55bp), Bank of us (15-40bp), Bankwest (10-25bp), Citi (3-28bp), HSBC (10-20bp), ING (15-40bp), Macquarie (5-25bp), Suncorp (5-45bp), and UBank (10-25bp). 

We also noted a minority of term deposit providers increasing rates in April including: Bank First (15-35bp), Beyond Bank (15-20bp) and Qudos Bank (short term 25bp increases).

Judo Bank dropped out of the leading market position on its 3, 6, 9 and 12 month offerings, reductions ranging from 25 to 50 bp. Rabobank replaced them for the top spot for the 3 of the 4 terms.

* rate tables based on a deposit of $25,000

The content of this report is produced using Mozo's extensive database of banking products, which is updated every day.

If you'd like access to more detailed information, please contact us at data.services@mozo.com.au. 

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