ANZ taking heat for fixed-rate increase
ANZ is facing criticism for increasing its two-year fixed interest rates by 10 basis points, with a blowout in processing times resulting in many applicants not receiving the bank’s market-leading rate as advertised in late March.
Since March 20, ANZ had offered a two-year fixed rate of 2.19 per cent, which, according to a bank spokesperson, had been very popular with applicants due to it being the lowest rate on offer from any major Australian bank.
But last week, ANZ announced it had increased its two-year fixed rate to 2.29 per cent, bucking a long-running trend of declining interest rates.
Canstar finance expert Steve Mickenbecker described the change as “fine tuning”, but at the same time a leading mortgage broker, who spoke to Australian Property Investor Magazine on condition of anonymity, said it appeared to be a cash grab as many applicants would miss out on the lower rate.
ANZ’s processing times for loan applications reportedly blew out to 23 business days midway through this month, with a spike in demand for refinancing driven by the COVID-19 crisis.
An ANZ spokesperson told Australian Property Investor Magazine that 23 business days was a worst-case scenario, but the time it takes from application to approval was still averaging between 15 and 18 business days.
With another three weeks generally needed for a transaction to reach settlement post approval, that would result in many applicants who were attracted by the 2.19 per cent fixed rate having to accept the new, higher interest rate.
The ANZ spokesperson would not reveal how many applicants had applied for, and received, the 2.19 per cent fixed rate.
“It's only a small increase, but they have timed it perfectly,” the broker said.
“Get a stack of business through the door, then before any of those deals can settle because of their own delays with processing, they jacked the rate up.
“The way fixed rates work, the customer gets whatever the fixed rate is on the day of settlement, not from when the application was lodged.
“There is the option to pay a fixed rate lock in fee of $750 which does lock the rate in at time of application, but that is very rarely taken up due to it being such a large fee and this takes away from the majority of the savings a client might get from locking in at that low rate.”
The ANZ spokesperson confirmed that very few of its applicants had taken up lock rate facilities, but they maintained that the bank’s interest rates for both fixed and variable rate loans were highly competitive.
Data from Canstar showed average two-year fixed rates across all banks were 2.61 per cent, with Freedom Lend and ING offering market-leading two-year fixed rates of 2.09 per cent.
Reduce Home Loans also recently increased its two-year fixed rates from 2.09 per cent to 2.19 per cent.