Mortgage relief as ANZ cuts fixed rates

ANZ has lowered its fixed rate home loans but isn't making any promises on its variable rate loans.

Mortgage relief as ANZ cuts fixed rates

ANZ has cut its fixed mortgage interest rates by up to half a percentage point, but isn't making any promises on variable rates.

The bank said today that rates for fixed rate home loans and residential investment loans will fall by between 11 basis points and 50 basis points.

Its one year fixed rate will fall by 11 basis points to 8.99 per cent, per annum, the two-year fixed rate will  be cut 35 basis points from 9.34 per cent to 8.99 per cent, its five-year and seven-year fixed rates will fall 50 basis points from 9.49 per cent to 8.99 per cent. The new rates will come into effect on Monday.

The decision by ANZ to cut its fixed rates - but not its variable rates - comes as financial markets factor in a likely cut in official interest rates next month.

More cuts not guaranteed

Earlier today, ANZ managing director for mortgages Michael Rowland told a federal parliamentary committee hearing in Melbourne that there was no certainty the bank would pass on in full any cut by the Reserve Bank of Australia.

"We would like to cut those interest rates but we will have to assess what is happening to our funding costs at that time,'' Mr Rowland told the committee.

The House of Representatives Economics Committee is examining whether competition in the financial sector has been reduced following the global credit crunch.

Official rate cuts looming

Economists at major financial groups now expect the first rates cuts this year rather than in 2009 after the Reserve Bank of Australia (RBA) this week hinted it would look to lower rates if the economy keeps slowing.

The RBA left offical interest rates on hold at a 12-year high 7.25 per cent on Tuesday for the fifth month in a row.

But with signs the economy is slowing, ANZ, National Australia Bank and Westpac are now forecasting a rate cut in September followed by another easing in the December quarter and more relief in 2009.

Conversely, Australia's biggest home lender, Commonwealth Bank, says interest rates will stay on hold to the end of 2009 as the resources boom fuels inflationary pressures.

Fixed rate loans losing favour

ANZ's move on fixed-term mortgages followed data showing the popularity of fixed-rate home loans had halved since the start of the year, a sign that borrowers may be holding out for an interest rate cut.

Australian Bureau of Statistics (ABS) data this week showed 11.7 per cent of new mortgages approved in June were at a fixed rate, the lowest market share since October 2005. That was a big fall from March when fixed rate loans commanded 23.9 per cent of all new housing finance commitments.

Fixed rate loan numbers have fallen for three successive months, the ABS data showed even though the major banks had lifted their standard variable lending rates independently of the Reserve Bank of Australia.