ANZ will scrap its most popular mortgage, a package loan, in a move that will impact 350,000 existing customers.
The Breakfree package provides variable rate customers with a free credit card and offset account, however, the bank charges a $395 annual fee and higher interest rate than its basic loan.
The package had previously come under scrutiny as part of the Hayne Royal Commission examining whether banks were providing value to their customers in return for higher ongoing fees on some loan products.
From March, the Breakfree package will be removed, with ANZ customers being offered a discounted standard variable rate with no fees, and the option of an offset account for $10 a month.
Customers will also be given the option to switch to the bank’s basic home loan, which has a redraw facility instead of an offset account and a lower advertised interest rate of 2.19 per cent.
Following the royal commission ANZ agreed to pay $25 million as a penalty for failing to properly pay its customers under the terms of its Breakfree mortgage packages, on top of $200 million it must return to customers.
RateCity.com.au Research Director, Sally Tindall, said it’s important for existing customers to assess their options.
“Customers shouldn’t automatically assume they’ll be ahead under this new structure,” Ms Tindall said.
“People who want to keep their offset account and their credit card could end up paying more in fees if they’re not careful.
“ANZ variable customers should use this opportunity to look at all available options and think about what best suits their finances. They might find they’re better off ditching their offset account and credit card and moving to the bank’s basic home loan with advertised rates starting from 2.19 per cent.
“It’s also a unique opportunity for customers to renegotiate their loan with the bank, especially if they find they’re paying higher rates what’s on offer to new customers.”
Ms Tindall notes that while high fees make a difference, interest rates have more impact over a long period of time.
“While fees can start to add up over the life of a 30-year loan, they shouldn’t be looked at in isolation,” she said.
“Having a lower interest-rate usually plays a more significant role in the overall equation, especially on larger loans.
“People should also review their credit card at least once a year to check whether it’s working for them, or against them.
“Often credit cards can end up burning a hole in people’s pockets through excessive interest charges and annual fees.”
