Bank to weather a $140 million revenue hit this year in hopes of revitalizing home loan segment
ANZ is ending its jumbo Breakfree mortgage package in the hopes of giving a shot in the arm to its home loans business. The bank says it will weather the short-term pain – a projected $140 million hit to revenue this year – in the hopes of revitalising the struggling business.
Mark Hand, retail and commercial banking group executive at ANZ, said the bank had been working on simplifying its mortgage packages for the last 18 months. He told The Australian that the simplification was a bid for customers who get their banking products from a variety of financial institutions.
“Large packages are a deterrence for customers who have products at other banks,” Hand said. “We think this will hit the sweet spot.”
In its quarterly trading update last week, ANZ said it was making changes to mortgage packages in its retail and commercial division that were expected to slash income by $140 million this financial year.
The Breakfree package offered a discounted interest rate and allowed customers to bundle their mortgage with other products for a $395 annual fee. Starting next month, new customers will be able to choose between three products, The Australian reported – a standard variable-rate option, a fixed-rate loan and a “no frills” option.
Customers can choose to have an offset account for $10 per month, but there will be no loan approval fees, loan administration or progress-payment charges, or progress payment or loan renegotiation fees, The Australian reported. Existing Breakfree customers will retain their current rate discounts when they convert to a simplified mortgage product in September.
Read next: ANZ dropped ball on mortgage approval times – chairman
Hand said he expected the changes to attract new customers and improve retention rates.
ANZ’s long-term customer attrition rates were about 25%, which is in line with the industry average. However, the bank has struggled to grow its mortgage book, so its position has been weaker than that of the other big banks. The bank has been facing pressure from investors to jump-start its mortgage business after a tumble in market share driven by long turnaround times.
ANZ chairman Paul O’Sullivan said at the bank’s annual meeting in December that the mortgage portfolio would start to grow again in the first half of financial 2022, but that it wouldn’t catch up to the rest of the banking system until the second half.
Hand told The Australian that the bank was on track to meet those targets.
“We have addressed our capacity issues in simple loans and now we’re addressing more complex deals,” he said. “The latest update from brokers is that our median time for more complex deals is now down to nine days.”
