7 Comments 7 Commentsby Jenny Ruth
The bank will raise the interest rate from 5.65% to 5.86% from November 1 on both ANZ and National Bank-branded FlexiPlus accounts which are secured by mortgages. However, its standard floating rate remains unchanged at 5.74%.
A letter advising FlexiPlus customers of the rate rise gave no reason for the increase.
"These types of home loan offer significant flexibility for customers in comparison to our other home loan products, as they act as a revolving credit facility and fully transactional account secured by a mortgage," an ANZ spokesperson says.
"Interest rates for these products are influenced by a number of factors including competitive positioning, the cost of funding, and the cost of the additional customer functionality with the Flexi product. We regularly review our interest rates taking all of these factors into account."
Which doesn't really answer the question.
David Tripe, head of banking studies at Massey University, says it "makes no sense at all" that the interest charged on such revolving credit accounts to be lower than a bank's standard rates.
"I have long argued that those products are far too cheap," Tripe says.
When such accounts were first introduced about 1990 they used to be priced at about a 100 basis point premium to banks' floating rates, he says.
"Pricing went completely haywire on that class of product seven or eight years ago." Tripe suggests this was the result of marketers within banks taking over "rather than anybody with any rational approach to credit risk and pricing."
Even after the rise, "an 11 basis point premium is hardly a big deal."
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Clearly Mr Tripe is in the dark as to the margins banks are currently making on floating interest rates. As head of banking studies at Massey University one would have thought he would be better informed on the subject matter he teaches.
ANZ National's increase to their advertised FlexiPlus (revolving credit) accounts is unjustified and out of synch with what their competitors are able to offer borrowers. I negotiated a rate of 5.39% p.a. for a client at Westpac yesterday who wanted some of their mortgage on revolving credit. I didn't even have to push that hard.