Days to the General Election: 26
See Party Policies here. Party Lists here.

Country's largest bank drops floating mortgage rate by 0.05% to 5.59% but raises some term deposits up to 0.3%; CEO urges people to pay down debt and save

Country's largest bank drops floating mortgage rate by 0.05% to 5.59% but raises some term deposits up to 0.3%; CEO urges people to pay down debt and save

The country's largest bank, ANZ, is passing on just a fifth of today's Reserve Bank interest rate cut to mortgage borrowers and is urging people to pay down debt and save more.

"Record low interest rates are an opportunity for households to pay down their home loans and to focus on saving," ANZ New Zealand CEO David Hisco said today.

Hisco's comments follow on from his recent unusual move of writing a newspaper article that outlined his current thinking on the property market and the economy.

ANZ announced today it will lower floating home loan rates by 0.05% p.a. to 5.59% p.a. but will increase rates for some term deposits by up to 0.30% p.a. to 3.60% p.a. in response to the Reserve Bank’s official cash rate cut.

To "continue support for the business community, particularly farmers", floating rates for Commercial, Agri and Business loans will be reduced by 0.15% p.a.

Westpac was the second bank to move, saying it's cutting its floating mortgage rate by 10 basis points to 5.65%, with the reduction applying to its Choices Floating, Choices Everyday and Choices Offset rates. The cut is effective for new lending from Friday, August 12, and from August 31 for existing customers. Westpac's also introducing a "special" six month term deposit rate of 3.50%, an increase of 50 basis points on its existing six month term deposit rate, effective Friday August 12.

ASB has matched the Westpac move in an announcement at the end of the day.

ANZ 'refocusing'

Hisco said ANZ was "refocusing" its lending and borrowing emphasis.

“On the deposits side, we have five times as many customers as those with home loans. Lifting term deposit rates will help customers grow their savings,” Hisco said.

“We are sending a strong signal today to New Zealanders that at a time of record low interest rates, it is more responsible to pay down home loans and save, than borrow more. New Zealanders need to consider changing their financial strategies.”

So that first home buyers weren’t disadvantaged by the changes, ANZ was also today launching a "special home loan package".

Only available to first home buyers using KiwiSaver, it will include a 0.20% p.a. discount on the prevailing ANZ standard variable interest rate and access to ANZ Buy Ready, a comprehensive set of tools, resources and special benefits to help people through the house purchase process.

“The Reserve Bank’s decision to cut the OCR to try and drive the New Zealand dollar lower is the right move to protect our export industries which employ many Kiwis,” Hisco said.

“Dramatically lowering lending rates would only throw fuel on the fire in an overheated housing market. That would be irresponsible and negate any economic benefit to New Zealand and drive up the country’s debt as banks seek expensive offshore funding for increasing home loan books.

“While this may mean we write fewer investment loans, we believe it is the right thing to do.

“Meanwhile, we still want to help first home buyers and commercial, agriculture and business customers.”

He said ANZ would monitor the impacts of this decision and may adjust its market position in future to ensure it remained competitive.

See all banks' carded, or advertised, home loan rates here.

Floating Prior rate New rate Change effective from
  % % % for existing clients
         
5.64 5.59 -0.05 29 August 2016
ASB 5.65 5.55 -0.10 24 August 2016
5.69 5.64 -0.05 29 August 2016
Kiwibank 5.45 5.25 -0.20 29 August 2016
Westpac 5.75 5.65 -0.10 31 August 2016
         
5.45      
HSBC 5.75      
ICBC 5.60      
HSBC 5.69 5.54 -0.15 18 Sept 2016
5.54      

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

56 Comments

Is ANZ's move an example of poacher becoming game keeper or just a convenient excuse for price gouging?

11
up

Any argument the banks are not passing on the rate cuts as some form of civic duty to keep the Auckland housing market in check is laughable. It is not in their nature. They are price gouging and you cannot blame them for doing so (especially given the common ownership of the major banks).

The call by the PM to pass on the cut is ridculous, it's like asking a mosquito to only suck until they're 50% full.

However, I do belieive the market will prevail and new lenders will enter a market where supernormal profits are being made (i.e. Chinese and Indian banks looking for better returns).

Poor Mr Wheeler,

He cut's rates and the Kiwi rallies hard.
Then ANZ only cut their rate by 5bp, keeping 20bp for themselves. Here is my guess, ANZ's TD rise will be slowly dropped down in the coming months and what we have seen from them is just a PR exercise to cover their holding onto 20bp of cut.

That is a joke - the entire 0.25 should be cut off mortgages - the public won't stand for this - Hisco seems as incompetent as Wheeler. Cut you greedy bankers - you are making more billions than ever before and your margins are now very wide. John Key - the banks are not listening to you!

The banks need it to cover off the dairy sector so record profits can continue! Good times to be a bank shareholder.

John Key is a member of the Bank Family.

The public does stand for it though. We are the meekest most tolerant nation on the planet.

Kiwis are inherently lazy, it's why they stay with the same bank, power company, telco, etc.... Competition only works if we are willing to shop around. Sadly we don't.

Hisco does not deserve the flack he has been given for sounding the alarm! In fact, not doing so is irresponsible - a 90% tax-free increase in Auckland house prices in 4 years while our real economy is going backwards. But since when did the bankers get to play government - choosing who to give the benefit of the cut too? They already have the power to print $ with fractional reserve banking. Lets now forget - Bankers have no qualms with the moral hazard of the taxpayer bail-out which is why they take such risk. RBNZ needs to introduce Loan-to-Income multiple restrictions & get ahead of the curve for once.

When did a NZ bank last get a bail out?

BNZ was sold in 1992 so it did not go under,
I remember being young and naive and had my whole life savings in it and a friend told me it was going broke but my answer was it cant NZ own it.
next minute sure enough government had to pump money in and sell it to NAB to keep it afloat
now I split my money over 5 banks

It was 2008 - Citigroup (who alongside HSBC, JP Morgan & National Nominees) owns the big 4 Australian banks - which then owns the big 4 NZ banks, just not NZ taxpayers... directly anyway.

Citigroup does own the big 4 banks. They are listed on the ASX and while citigroup and citigroup nominees (eg 401k funds, etc) may manage share holdings in the majors (as they would in Spark, Fletcher etc) it's a stretch to say they own it. Going back to the original statement though - NZ taxpayers not on hook. Actually, under OBR it's largely shareholders and depositors on the hook..

even with the OBR I still think the party in charge if it happens will cover the first 10 or 20K, as they will want to stay in power and to let banks take all of their voters money is a recipe for getting out of power quickly

Citigroup is not listed on the ASX.

It's not a stretch to say they own it! Citigroup, HSBC, JP Morgan & National Nominees together hold a controlling stake in ALL the big 4 banks which are all on the ASX. That means they own it & make the decisions in the normal corporate manner on behalf regardless of whether they are acting in a custodian capacity.

Shareholders should be on the hook, its called business risk. However, NZ taxpayers will be on the hook be it via bail outs or an increased risk premia...

I don't think your comments are accurate. Refer "http://blog.creditcardcompare.com.au/big-four-ownership.php"
"Citicorp Nominees Pty Limited: 4.94% of Westpac; 4% of NAB; 4.15% of ANZ; 4.47% of CBA"
‘Custodians’, by definition, hold customers’ securities for safekeeping, in addition to offering other services such as account administration and collection of dividends and interest payments, for a fee. They are not active participants in decision-making. It would be wrong to imply that by having a 17% stake in Westpac, for example, HSBC also has 17% of the vote: as a custodian, HSBC only processes the proxy votes of the customers for whom it holds the shares—and these customers could be large sovereign wealth funds, or a board member of Westpac, or a family-owned business in Sydney. Discrepancies in proxy voting do occur, and many uneducated investors aren’t even aware they can cast votes. But in principle, HSBC, in a custodian role, acts only as the messenger, not the decision-maker.

You're using 2014 numbers - e.g. these 4 institutions only owned 44.53% of Westpac in 2014 but alas we are now in 2016 so you should do your own math based on the annual reports etc ;-)

"They are not active participants in decision-making" - It's a naive interpretation you have of the real world - when you hold 17% of a share register on trust or otherwise, you have a very real ability to influence both your investor base and the decision making where you have 17% control - incidentally a large enough chuck to gap the share price down very very fast. Do you believe in efficient markets too? cute.

This statement about the authority of custodians and nominees is inaccurate.

We sold all the banks so you cannot control what you don't own. We are still selling off the rest of New Zealand to overseas buyers. Kiwis are slow learners but they are very greedy.

If you have a floating mortgage with ANZ then change bank

or if you are old and live on term deposits to top up your super head to the ANZ
always two sides to the coin

Could be worse - I have a floating mortgage with Westpac who've cut 20 bps of the last 50 bps cuts.

Ask them for a discount. I just got my 0.50% off floating rate renewed for another 2 years.

Already have the 0.50% discount. It frustrates me that it's a discount off the highest floating rate in the market.

Ask for more. The thing is you may not get any if you went to Kiwibank. What you see is what you get from my experience. I think you will find the actual rate you end up with will be similar across all the banks provided you are a good customer in the eyes of all of them.

Anybody thinking this is a reactionary move to a crisis, should think again!
Just because one is paranoid doesn't mean they aren't out to get one!

As a saver I'm happy if they increase interests.
Otherwise goodbye NZ banks and I'll take my money somewhere else, thanks.

Are they scared of losing depositors?

Can you elaborate on where else you can take your money as I have found many other investments carry a much larger degree of risk.

I've got bank accounts in two European countries, both EURO zone. I don't see any risk to the EURO right now.

Interest there is not higher but at least deposits are guaranteed.

I don't think it's anymore about return but about keeping value. And as long as the interest is above inflation and funds are guaranteed I think I am ok with that.

Other option is to buy gold or at least ETF on gold (linked to gold index), or shares in some big technological company (they are the ones that have more liquidity and during deflation cash is king).

Or the safest.. spend it and live life :)

the worlds rich are doing the same and now holding up to 20% in cash waiting for the next GFC, guess that why they are rich they can take advantage of cycles
http://www.cnbc.com/2016/08/10/billionaires-are-hoarding-cash.html

Can you elaborate on where else you can take your money as I have found many other investments carry a much larger degree of risk.

blatant gouging -- and probably more to come as other banks respond in a similar way. Wonder if the need to have 40% equity if changes are made from existing portfolios will be restricting a lot of people from changing banks - and therefore is impacting on the banks ability to basically ignore the cut as the potential loss of business is much lower ?

For Pete's sake guys, the banks have to fund what they lend you. Their lending growth is much stronger than their deposit growth as more and more of those depositors take money out of the banks increasing low yield deposit/savings accounts and chase the retail property market in the expectation/hope of better yields. And as the banks then try to fill the gap through the much more volatile wholesale markets that funding cost is rising. So its logical that they only pass part of the cut on to borrowers and likely increase modestly their depo rates.

Well said. People forget this sometimes. The fact is savers getting 0.25% on retail savings products will take their funds elsewhere and banks don't fund off of OCR.

I repeat my comment from Sunday and many times before that.

ANZ's economists also banged the drum this week about the potential for banks not to pass much of it on, either to term depositors or savers.

They pointed out that mortgage lending was now growing significantly faster than term deposits for the first time since the Global Financial Crisis. That means that banks are having to go overseas to borrow to fund the extra mortgages, which our credit rating agencies and the Reserve Bank itself are not keen on.

BIS claims: Deposits are not endowments that precede loan formation; it is loans that create deposits. Borio Page 17 of 38

Hence every new loan creates a deposit for an agent selling an asset to a debt financed buyer, possibly just not a term bank liability, since the selling agent may credit a business financing account. Farmers selling holiday homes would fall into this category.

Collective bank liabilities always match their assets, but the breakdown of each participating borrower /lender cohort does not necessarily have to match.

Please point to evidence beyond RBNZ tables, S6(bank funding) and S7(bank claims), after mutliplying claims by 21% (foreign funding) and adding this back to S6, where there is substantive evidence of a claims/ funding mismatch.

Repeat it as much as you like. But refer to the balance sheets and GDS's of the main banks to understand where their funding comes from. It's not thin air.

Tell that tale to the Bank of International Settlements.

They have to fund some of it.. don't they use the magic of fractional reserve banking to do the rest?

Read their GDS and Balance Sheets

"...it is more responsible to pay down home loans and save, than borrow more" is this a bit of smoke and mirrors? Given that all deposits are effectively the property of the banks, this CEO is encouraging people to save not borrow. Until now they have been raking it in on debt funded spending, but this change is interesting. The cost of lending is relatively low for a bank while their margins are pretty good on the interest they charge. Are they seeing changes on the horizon that indicates that their lending practices may have an increasing risk profile into the future. Are they trying to quietly alert their clients to the increasing risk of debt fueled spending, while juggling increasing noises (at least from Canberra) that regulation might be on the doorstep and they need to change their business model? Changing from lending to accepting deposits shifts their risk profile, and profits, and puts them in a position to dry up money in the economy.

[ Deleted. Ed. Only proper intelligent comments are needed here. ]

What a well thought out response. Bear in mind that there are plenty of savers, so there's two sides to any coin.

Disagree, as a saver I am still not seeing the love.

Last rate cut they dropped savings while not passing on to Mortgages. This increase is still less than the last cut.

End result I am still worse off, while the banks have posted another round of record quarterly profits.

Yes, yes they are.

I am sure David Hisco is genuine in his concerns about NZ'ers debt level, and the need for us to focus on paying this down. Does he realise that by only passing on 20% of todays Res Bank cut he is restricting our ability to do that?

He is certainly reducing the number of young people at risk of locking themselves into an over-priced asset that might bite them in the bum at anytime in the future and set them back a decade or more financially

Keeping in mind that deleveraging was the main contributor to the Great Depression, what will happen if we all take Hisco's advice and deleverage with inflation currently just above zero?

It's disgusting passing on only 0.05%. Shame on ANZ. Change banks

you could go to westpac they will give 0.10 %

lol, what a competitive nation we live in. Free market - yeah right.

Off a rate that was 0.11% higher than ANZ's!

I’m a bank depositor and shareholder but not a mortgagor. If banks don’t provide a sufficient rate of return or present too high a risk profile, I’ll move my money elsewhere. Investing 101.

The clamour for banks to pass on most of the OCR cut to retail customers, stuff investors and savers, is wishful thinking. Banks have to raise cash in response to rising risk and falling support from depositors and investors, with a recent issuance generating tepid interest. They have to increase deposit rates and interest margins, to retain investor support.

Bank shares have, on a total return basis, been mediocre performers compared to other sectors, with the latest APRA capital adequacy increase and perception of loan impairment risk, triggering a significant price pullback. More of the same if banks were forced to pass on the full cut to mortgagors and find the cash elsewhere to shore up their balance sheets. The risk of political intervention is so far muted but my finger is hovering over the sell button.

Why did the chicken cross the road ?
To get another 0.05 % off the mortgage rate...

Gotta love ANZ, socially responsible, far sighted and ethical move!!

DISCLOSURE: Proud ANZ Shareholder!

Banks are there to lend you debt! ANZ profit down 3% only 5.3 billion
CEO has KPI's for his bonus and #1 will be increase profits YoY
So by keeping 80% of OCR cut will increase margin and hence get him his bonus !

I just see it as a sign of risk. The banks should put mortgage rates up a percent or two, just to clear out the riff raff that are over stretched.

My message to the ANZ.
You pretentious usuaries. How convenient for you to increase by a minuscule amount deposit rates, and then feign public good and hold fixed mortgage rates static. What a tosser and insulting decision, ANZ...Do you think the borrowing public are ignorant ? The KPIs and profit margin are of more concern to you obviously, but to try and skew public opinion by postulating like some government department is abhorrent. I will be not be in a position that I am adding to your margin as soon as I can organise it.

Days to the General Election: 26
See Party Policies here. Party Lists here.