Anz Cut Surprises Rivals
Sydney Morning Herald
Friday May 1, 1998
ANZ Banking Group has set the scene for a fierce battle in the $60 billion personal loan market by slashing interest rates on its loans by up to 3.5 percentage and undercutting its rivals.
ANZ has cut the rate on unsecured loans up to five-year terms to 9.5 per cent. This is 4.25 percentage points below National Australia Bank's rates, which are the highest of the four big banks.
The move caught banks by surprise. A spokeswoman for interest rate monitoring company Cannex, Ms Cassandra Williams, said it would force other lenders to have a look at personal loan rates. "Any more competition means lower rates and that's good for consumers," she said.
However, added annual fees would negate some of the savings, particularly on small amounts and loans over long periods. ANZ's unsecured personal loans include a $100 annual charge.
Analysts said the move showed banks' increasing reliance on fees as interest rates fell in response to greater competition. ANZ's variable personal loan rate remains at 11.75 per cent.
ANZ manager of media relations, Mr Paul Edwards, said: "The primary reason [for the rate cut] was to differentiate our personal loans from our credit card loans. We found that people that wanted small personal loans were using their credit card."
So far the mortgage market has been the main battleground for lower interest rates. While official rates have fallen by 2.5 percentage points since May 1996, standard variable home loan rates have dropped by 3.8 percentage points to 6.7 per cent, according to the Reserve Bank.
But unsecured fixed-rate personal loans have only fallen from 14 to 12.2 per cent, while credit card rates have fallen by just 1.4 percentage points to 15.3 per cent.
Australian Consumers' Association policy officer Mr Peter Kell welcomed the new personal lending rates. "We're finally seeing some action in credit products outside the home loan area. The news is to be applauded and we hope some of the other banks follow sooner rather than later."
Last November, Westpac lowered its interest rate and added flexibility to its car loan product. GE Capital's Shell MasterCard and Citibank's credit cards are offering rates of between 9 and 9.9 per cent, but only for a six-month introductory offer. The rates then revert to levels similar to other credit card providers.
Market Faxts' Mr Tony McCoy said competition was now shifting to personal loans. "It started in home loans and has moved into business and personal loans. Next year more credit card interest rates will probably fall. I'd be surprised if the other banks didn't follow ANZ's lead."
Increased competition outside the home lending market is crucial in big-bank merger talks. The Federal Government opposes mergers between the "big four" local banks - National Australia Bank, Commonwealth Bank, Westpac Banking Corporation and ANZ - but overseas mergers and greater competition in the business lending market have increased pressure for it to revisit its "four-pillars" policy.
PERSONAL BEST 3-year unsecured personal loans ANZ 9.50% Colonial 9.99% St George 11.95% Westpac 12.49% CBA 12.70% NAB 13.75% Source: Cannex
© 1998 Sydney Morning Herald
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