ANZ scraps popular Breakfree home loan – find out how it affects you

In a major shake-up, ANZ has announced it will scrap its most popular mortgage– its package loan – impacting 350,000 existing customers.

The ANZ Breakfree package currently provides variable rate customers an offset account and a ‘free’ credit card. In return, it charges customers an annual fee of $395 and a higher interest rate than its basic loan.

From March, the Breakfree package will disappear. Instead, variable customers will be offered a discounted standard variable rate with no fees, unless they want an offset account for $10 a month. If customers want a credit card they will have to apply separately.

Existing Breakfree variable customers will not see their interest rate change and will no longer be charged the $395 package fee. However, if customers want to keep their offset account and /or credit card they will have to pay these fees ($10/mth for offset, between $30 and $425 p.a. for credit card depending on type). This means customers wanting both an offset and credit card could pay up to $545 a year in fees.

Customers will also be given the option to switch to the bank’s ‘no frills’ basic home loan, which has a redraw facility instead of an offset account and a significantly lower advertised rate (currently from 2.19 per cent).

Customers on a fixed rate package, by and large, do not have access to an offset account but get a 0.15 per cent rate discount paying the annual fee. These customers will keep the rate discount without having to pay the annual fee, however, if they have a credit card and want to keep it, they will need to start paying this fee.

ANZ home loan changes – variable options

Note: above rates are for owner-occupiers paying principal and interest. Loan-to-value requirements apply.

RateCity.com.au research director, Sally Tindall, said it’s important for existing customers to think through their options before the bank contacts them.

“Customers shouldn’t automatically assume they’ll be ahead under this new structure. People who want to keep their offset account and their credit card could end up paying more in fees if they’re not careful,” she said.

“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.

“While fees can start to add up over the life of a 30-year loan, they shouldn’t be looked at in isolation. 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,” she said.

RateCity.com.au home loan database analysis:

• 11% of home loans have no fees (upfront or ongoing). 
• 52% of home loans have no ongoing fees. 

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