Rate changes

In the past, Australian banks have announced interest rate changes following the Reserve Bank of Australia’s (RBA) announcement of its cash rate on the first Tuesday of each month.

However, the economic and banking crisis in Europe is having real consequences for the Australian economy and bank funding costs.

Bank funding costs are now less directly related to movements in the RBA’s cash rate. In addition to changes in the cash rate, the price we pay for customer deposits and for the domestic and international wholesale funding that we rely on to continue to lend to customers, have become increasingly important since the GFC.

This is why we now review our variable home loan and small business interest rates on the second Friday of each month, with any changes to take effect on the following Friday.

For customers, our new approach will provide certainty about when our rate reviews will occur.

For us, it provides flexibility to take all the relevant factors into account when reviewing our rates and allows a more balanced and informed discussion as opposed to the public debate that follows the RBA’s decision each month.

Back to top

We now review our variable home loan and small business interest rates on the second Friday of each month, with any changes to take effect on the following Friday.

The five key criteria we base our decisions on are:

1. Ensuring attractive returns for depositors: ANZ is committed to providing customers with competitive returns and absolute security for their savings.
2. The cost of wholesale funding: This covers the interest we pay on funds we borrow from wholesale money markets. The cost of funds has become more volatile and expensive since the GFC and has been elevated in recent months as a result of the European debt crisis.
3. Our competitive position: ANZ is determined to remain competitive by attracting customers, winning business and managing our costs.
4. The impact of economic conditions on our customers: We are committed to lending responsibly and giving consideration to the financial health of our customers, the economy and the banking system in Australia.
5. Regulatory requirements: As a bank, ANZ works within a strong prudential and regulatory environment. For example, we must hold capital reserves and levels of liquidity to operate safely and securely for customers.

Communicating these criteria helps us better explain our future decisions on interest rates to customers.

Back to top

No. It means we will base our review on five key criteria – not just the RBA cash rate. 

Back to top

Like any business, we need to set our prices so they cover our costs. As a bank, one of the ways we cover our costs is by adjusting the interest rates of our loans to reflect changes in our cost of funds.

Since the GFC, our cost of our funds (deposits from customers and money we borrow from wholesale markets to lend to customers) has become much more expensive, particularly in recent months as a result of the economic and banking crisis in Europe.

Back to top

We would expect so where there has been a sustained movement in funding costs and with careful consideration of the other rate decision criteria outlined above.

Back to top

The new monthly review applies to variable interest rate home loans and all variable interest rate loans and overdrafts for commercial customers (excluding Esanda).

Back to top

No. While many of the funding cost factors are the same, there are some differences.

Generally business loans have different security and risks than a home loan. As a result, we have to hold a higher level of capital and keep more in reserve for bad debts from business customers. This increases the cost of lending to businesses.

This may mean that variable rates for home loans and small business loans do not follow the same course.

Back to top

Home loans, particularly owner occupied home loans, are considered less risky than business loans. Generally business loans have different security and risks than a home loan. As a result, we have to hold a higher level of capital and keep more in reserve for bad debts from business customers. This increases the cost of lending to businesses.

In comparison, home loans, particularly owner occupied home loans, are considered less risky as we are lending to customers who are in employment, have a record of income and the loan is secured against the value of the home. This makes the loan much more secure and lowers the overall cost.

Back to top

We now review variable home loan and small business interest rates on the second Friday of each month, with any change to take effect the following Friday.

If there are any changes, we will tell you and you can make a choice about how you make your repayments. For example, if interest rates go down, you can choose to do nothing and keep paying the same amount and pay off your loan quicker. Or you can choose to reduce your payment.

Just as we do now, we will continue providing you with competitive interest rates, innovative products and flexible options to give you confidence and control over your finances.

You will be notified of any change to interest rates in the usual way which depending on your type of loan, may include a letter in the mail, information on your account statement, on anz.com, in our branches or business centres, in discussion with your relationship manager or from our Contact Centre, as well as an advertisement in the Australian Financial Review.

Back to top

If rates change and the amount of your required repayment changes, we will give you written notice outlining:

• the new minimum repayment amount
• when it will take effect
• any action you are required to take.

Depending on loan type and the method by which you usually make repayments, your repayment may be automatically changed. You will be notified if this is the case.

If you wish to change your loan repayments yourself at any time, you can do so as follows:

Back to top

Back to top

Variable interest rates are based on the cost of providing home loans to customers today, while fixed rates are based on the cost of funding a home loan for a period of time into the future. 

As a result, we make decisions on variable rates and fixed rates on a different basis and at a different time.

Back to top

We have no intention to disadvantage ANZ customers. ANZ is committed to providing you with competitive interest rates, innovative products and flexible options over the long term that give you confidence and control over your finances.

Importantly, we’re also committed to being a safe and secure bank and playing a key role in the financial health of our customers, the economy and the banking system in Australia.

Back to top

The Australian market is highly competitive, which can be seen in the difference between the standard variable interest rates of banks.

In addition to the major banks, there are over 100 other mortgage providers in the market, offering a total of more than 500 mortgage products. Businesses also have a large number of financial institutions to choose from.

Back to top

Banks are among the biggest companies in Australia so the size of their profits look big compared to many other companies. But as the Reserve Bank said in its submission to the Senate inquiry last year, the level of bank profits in Australia is not out of line with other key Australian business sectors in the economy.

Like any business if costs go up significantly prices have to go up. Unlike most businesses, when interest rate costs go down, banks reduce their prices.

Banks play an essential role in maintaining the availability of credit that supports economic growth, as well as providing savers with the confidence that their deposits are safe and secure.

A strong banking sector and well-managed government finances are the best protection an economy can have in the event of a major downturn. The health of Australian banks was an important reason why Australia maintained a stable financial system during the GFC and avoided the economic troubles many other countries experienced.

Back to top

You can lodge a complaint in writing to:

Complaints Resolution Centre
Locked Bag 4050
South Melbourne VIC 3205

If this is inconvenient you can:

Call our Complaints Resolution Centre on 1800 805 154, 8am to 7pm (AEST), Monday to Friday.

Lodge a complaint online

Talk to our staff in any ANZ branch or Business Centre

Back to top