ANZ Rate Cuts: What Homeowners Need to Know About New Deposit Requirements
In recent news, ANZ, one of the big four banks, has announced a rate reduction for fixed home loans, offering a 0.25% rate cut for both owner-occupiers and investors. However, this reduction comes with a significant caveat: only those who can afford a 20% deposit or more will be eligible for the new, lower rate.
This strategic move positions ANZ as the bank offering the lowest fixed rate among the major players, with rates as low as 5.74% for two- and three-year terms for qualifying customers. According to Sally Tindall, Canstar’s Data Insights Director, this highlights the bank’s intent to attract more reliable borrowers amid growing competition in the fixed-rate space. Tindall emphasizes that ANZ's move might prompt other banks to follow suit in the short term.
Not All Borrowers Will Benefit
The reduced rates, however, won’t benefit a large portion of potential homeowners. In fact, Mozo reports that 84% of Australians saving for a home loan deposit are currently unable to meet the 20% deposit requirement. For the typical Australian home priced at $973,300, a 20% deposit equates to over $194,000—a considerable hurdle for most.
In states like NSW, where the median house price stands at $1,222,000, a 20% deposit would require a staggering $244,400. For those unable to meet this requirement, not only will they miss out on the lower rates, but they’ll also face an additional 0.15% interest rate hike. Additionally, these borrowers must pay Lenders Mortgage Insurance (LMI), a premium that adds tens of thousands of dollars to the home loan cost—without offering the option for consumers to shop for competitive LMI rates. As Mozo’s Rachel Wastell points out, LMI fees are set by lenders, leaving borrowers with little recourse to lower these costs.
Why Risk-Based Pricing is a Double-Edged Sword
While risk-based pricing—offering lower rates to borrowers deemed less risky—is not new, ANZ’s recent adjustment reflects a clear preference for “safer” borrowers who can meet higher deposit requirements. This comes as property prices begin to show signs of cooling. As Sally Tindall mentions, there’s now a 0.45% rate premium for those unable to meet the 20% threshold, underscoring a stark division in borrowing costs for those with limited deposit savings.
What Does This Mean for Private Lending?
In contrast, private lenders, like Renown Lending, focus on flexibility and accessibility, catering to clients who may struggle to meet traditional deposit requirements. Where banks increasingly adopt stringent requirements, private lending provides a valuable alternative for those navigating affordability challenges, offering customisable solutions without the rigid qualification criteria seen in traditional banking.
If you’re exploring options beyond the constraints of big banks, Renown Lending can offer competitive alternatives that may align better with your needs—especially in a market where bank rates and deposit requirements continue to rise. Contact us today to discuss flexible lending solutions designed to empower more Australians on their homeownership journey.
