ANZ defies Swan on rates, but axes home loan exit fees

The country's fourth biggest lender yesterday increased its standard variable home rate by 0.39 to 7.80 per cent, putting it a fraction behind the Commonwealth Bank's 7.81 per cent.

But in a sign that controversy over bank behaviour may be having an impact, ANZ tried to soften the blow by scrapping home loan exit fees and temporarily waiving some other charges, which it said would make it easier for customers to switch banks.

Coalition Treasury spokesman Joe Hockey said the ANZ had delivered the ultimate slap in the face to Treasurer Wayne Swan, who had briefed journalists saying he had rung the ANZ, NAB and Westpac chiefs urging them not to follow Commonwealth's lead. "They are ignoring him," Mr Hockey told The Age.

"There's so little competition out there the ANZ feels it can nearly double the Reserve Bank increase and then made it easier for its customers to move . . . they've doubled the rate and then opened the door."

The bank made the announcement while Mr Swan was en route to South Korea for the G20 summit.

Prime Minister Julia Gillard, speaking last night after arriving in Seoul for G20, said the ANZ decision would reinforce public anger. She said banks came out of the global crisis in a strong position, so they had no excuse to put up rates beyond official increases. She said "no one should doubt our resolve" to boost competition.

As ANZ was jacking up its interest rates, the government was detailing a new legal threat to banks over loan exit fees. The Australian Securities and Investments Commission published tougher-than-expected guidelines on what it will define as an "unfair" loan exit fees. The legal threat, coupled with ANZ's scrapping of exit fees, is expected to prompt the other big lenders to also remove them.

Exit fees are charged when customers want to pay out a loan within the first three to five years. They vary between $700 and $900 among the big banks, but can run into thousands of dollars at some smaller lenders. The fees are seen as a barrier to customers switching between banks, and have been blamed for suppressing competition in the industry.

ASIC chairman Tony D'Aloisio said the regulator would challenge banks to justify their exit fee charges, threatening legal action where the fee did not reflect the bank's costs. "Where an exit fee cannot be justified by the lender, ASIC will take compliance or enforcement action," he said.

ANZ revealed it would scrap its $700 exit fee before ASIC's guidelines were made public.

At the same time it sought to soften the blow of its rate rise by offering a larger discount on its three-year fixed-rate home loan.

Any customer opting to fix their mortgage before December 31 will enjoy a 0.44 per cent reduction which would result in them paying the equivalent of 7.1 per cent per year 0.7 per cent below its newly-raised variable rate.

ANZ will also provide $1600 in subsidies and waived fees which will make it easier for customers to switch to ANZ from other banks. That offer will last until the end of this year.

However, there was mixed news from ANZ on savings rates and other charges, with the interest rate on one of its key cash management account going up by just 0.25 per cent.

Credit card interest rates will also rise by the same amount but business borrowers will be slugged with the same increase as home mortgage holders.

The angry political and consumer response to the Commonwealth's 0.45 percentage point increase prompted a week-long delay by ANZ and the two other major banks as they worked out how high they could go. Westpac and National Australia Bank have yet to announce their new rates.