AMP cuts rates on entry level mortgages

A stronger securitisation market has enabled AMP Bank Ltd to lower interest rates on
its entry level home loan products after hiking mortgage rates earlier this month.
AMP Bank dropped the interest rate on its basic variable home loan by 22 basis
points to 6.27 per cent, and cut the rate on its introductory variable mortgage by
45 basis points to 5.94 per cent.
The introductory variable home loan rate applies for only one year and will revert
to AMP's professional pack or classic club variable home loan rate thereafter, the
bank said in a statement on Sunday.
The new rates apply to new customers and become effective from Monday.
However no change was made to AMP's standard variable rate (SVR) of 6.94 per cent,
spokeswoman Amanda Wallace said.
AMP hiked its interest rates on most products by 25 basis points on March 2, moving
in lock-step with the big four banks following the Reserve Bank's move to increase
the official cash rate by 25 basis points to 4.00 per cent.
NAB's SVR stands at 6.74 per cent, CBA's is at 6.86 per cent, ANZ's is at 6.91 per
cent and Westpac's is at 7.01 per cent.
AMP Ltd's chief executive Craig Dunn said a revived market for residential mortgage
backed securities (RMBS) had helped AMP fund lending growth as well as providing
"much needed" competition to the big four.
"For those customers looking for an alternative to the major banks there is
competition of which AMP Banking is an example but there needs to be more," he said.
But Bendigo and Adelaide Bank's chief executive Mike Hirst on Thursday told AAP
while the RMBS market was showing signs of recovering, it was still far off the
level required to support a fully competitive banking sector.
"There is a long way to go before you could say it will be a source of funding that
would provide the non-majors (banks) with the amount of funding they need to be
really competitive," he said in an interview.
Mortgage securitisation is the process whereby lenders bundle up a number of
mortgages as an interest-bearing financial product and sell it to investors.
It can be an effective way of funding home loans because it matches investors who
want long-term fixed income with borrowers who repay their loan over many years.
AMP in January raised $1 billion from an upsized RMBS notes issue, and will look to
make more RMBS issues going forward, Ms Wallace said.
Bendigo raised $1.1 billion from an upsized RMBS transaction last Wednesday.