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Bank raises rates, sets sights on brokers

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Reporter 3 minute read

A challenger bank has announced a raft of changes to interest rates and revealed its broker strategy for the near future.

AMP Bank has, as of this week, increased variable interest rates for owner-occupied interest-only loans by 28 basis points. The increase applies to Basic, Professional Pack, Classic, Affinity and Select variable rate loans and lines of credit. The increase does not apply to construction and land loans.

For example, the Basic package variable rate for new owner-occupier mortgages (interest only) now starts from 4.56 per cent (4.28 per cent comparison).

As well as variable rates, the bank has also hiked fixed rates for owner-occupied and investment interest-only loans by 20 basis points. The increase applies to fixed rate loans between 1 to 5 years as well as for 1-year fixed interest in advance loans. 

Fixed rates for owner-occupied principal and interest loans have decreased by 10 basis points.

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Existing customers will not be impacted by the changes.

The maximum loan-to-value ratio for interest-only loans will drop from 90 per cent to 80 per cent, effective for loan applications received from Wednesday, 31 May.

This change applies to all owner-occupied loans and loans that include owner-occupied and investment property securities. Master limit applications will also be limited to 80 per cent LVR.   

The maximum LVR for purchases of investment property loans remains unchanged at 70 per cent.

AMP aims to be “provider of choice” for brokers

The rate changes were announced on the same day as AMP held its investor strategy day in Sydney, in which the bank revealed that it aims to become the “provider of choice to advisers and brokers” and believes it has “significant potential for future growth” via the broker market.

The group executive for AMP Bank, Sally Bruce, told The Adviser that mortgage brokers had been identified as one of the “key priorities and distribution channels” for the bank, and that it was therefore “looking to increase both the breadth and depth of [its] adviser and broker distribution network”.

Ms Bruce said: “Mortgage brokers currently generate more than 50 per cent of all home loan applications in Australia and, with the credit market growing, and AMP’s market share at just 1 per cent, we believe this market has significant growth opportunity.” 

She added that the bank had “boosted the team that supports intermediaries by 20 per cent, helping [the bank] with ongoing improvements to efficiency and speed for turning around applications”. 

According to Ms Bruce, this “service-focus, plus a compelling and competitive range of mortgage products, will play key roles in driving growth”. 

Speaking at the investor strategy day last week, Ms Bruce noted that the first quarter of the financial year 2017 had seen a 5 per cent boost in both mortgages and deposits. 

She commented that the bank was “confident” that the growth would continue for several reasons. Ms Bruce explained: “The first thing is because we have a very strong, established distribution capability… [W]e have the largest advice network in the country and we also have established broker relationships. When you look at that as a channel, it targets more than 50 per cent of all mortgage activity in the market."

Ms Bruce concluded: “In the broker fraternity and the market generally, we have 1 per cent market share, so we continue to reach further into the network and originate through those people. We're having great success with that in both of those channels; we're continuing to get broader reach into more advisers, more brokers, and originating more through them.

“So, we're just at the beginning of the journey which is what gives us comfort.”

[Related: Brokers help boost bank’s mortgage book by $2bn]

Bank raises rates, sets sights on brokers
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