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's 7.81 per cent.

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

This failed to appease Prime Minister Julia Gillard, who said last night banks had no excuse to put up rates beyond official increases after their strong emergence from the global crisis.

Speaking in Seoul, South Korea, after arriving for the G20 summit, Ms Gillard signalled that the government's banking reform package next month would give a boost to smaller lenders as a means of curbing the behaviour of the big four.

She said one effect of the global financial crisis had been to reduce competition from smaller lenders. "We want to see increased competition," Ms Gillard said. "Therefore reforms that enable increased competition [are] good for consumers, and enable them to shop around." She added that "no one should doubt our resolve to act" to boost competition.

Shadow treasurer Joe Hockey said ANZ had delivered the ultimate slap to Treasurer Wayne Swan, who had told journalists that he rang 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."

As ANZ was jacking up rates, the government was detailing a new legal threat to banks over loan exit fees. The Australian Securities and Investments Commission published guidelines on what it will define as "unfair" loan exit fees. The 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 announced it would scrap its $700 exit fee before ASIC released its guidelines.

The bank also tried to soften the rate rise blow by offering a larger discount on its three-year fixed-rate home loan. Any customer opting to fix a mortgage before December 31 will get a 0.44 percentage point reduction.

ANZ will also provide $1600 in subsidies and waived fees to make it easier for people 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 rise by the same amount. But business borrowers will be slugged with the same 0.39 point increase as home mortgage holders.

The angry political and consumer response to the Commonwealth's 0.45 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.