Australia and New Zealand Banking Group Ltd. cut its benchmark mortgage rate by 27 basis points, the first time one of the nation’s four major lenders passed on more than the central bank’s reduction since October 2008.
ANZ trimmed its standard variable mortgage rate to 6.13 percent, matching National Australia Bank Ltd.’s rate as the lowest among the country’s four biggest banks. NAB, Commonwealth Bank of Australia and Westpac Banking Corp. matched the 25 basis-point reduction by the central bank, which dropped the benchmark to a record low of 2.75 percent on May 7.
Competition for mortgages is intensifying because they remain banks’ main area of growth even as they expand at the slowest pace on record, stock exchange filings show. With the yield premium on bank bonds over government debt at the smallest since November 2007, lenders have cut home loan rates to their lowest since 2009.
ANZ’s move “places pressure on competitors that are either harvesting margin today or thinking about repricing their mortgage books,” said James Ellis, an analyst at Credit Suisse Group AG in Sydney. “Banks like mortgages as a lower risk area, which is at least growing at a system level.”
Bank earnings announcements in the past two weeks showed business lending was stagnant, Ellis said, adding that it’s unlikely to pick up until after federal elections in September.
Shares of Melbourne-based ANZ Bank fell 1.5 percent to A$30.14 at 1:28 p.m. in Sydney, more than the other three lenders. The benchmark S&P/ASX 200 index rose 0.3 percent.
Until this week, Australia’s top four lenders hadn’t passed on in full the central bank’s rate cuts that began in November 2011, citing higher funding costs and competition for deposits.
Banks are also facing less competition for household savings after racing to boost deposits to 55 percent of their funding from 40 percent in 2008. Special interest rates used to attract term deposits dropped to a four-year low of 4.20 percent at the end of April, Reserve Bank of Australia data show.
“This month we reviewed a range of factors including the Reserve Bank’s decision to decrease the official cash rate this week, our competitive position and a recent easing in the cost of our wholesale funds,” ANZ CEO for Australia Philip Chronican said in a statement. “While competition for deposits remains strong, our overall funding cost position has allowed us to reduce variable mortgage rates” by 27 basis points.
ANZ last lowered its home lending rate by more than the RBA in October 2008, when the central bank reduced its cash rate by 100 basis points and the lender followed with a mortgage rate drop of 105 basis points in two steps. CBA in the same month cut rates by 101 basis points in two steps.