Fixed rate home loans still popular: Survey

KPMG's annual banking survey gives an insight into what is happening in the highly competitive mortgage market.

Wednesday, May 5th 2004, 6:52AM

by Jenny Ruth

Residential mortgage lending by registered banks grew by 13.3% to $9.7 billion in 2003 while lending by other savings institutions such as building societies, most of which is on housing, grew 17.1% or by $367 million to $2.5 billion, according to the latest KPMG survey of financial institutions.

The fastest growing home lending bank at more than 1000% was the government's Kiwibank, which took about 9% of the total market growth in the six months ended December, taking its home loan book to just under $800 million. However, that accounted for only about 1% of the total market, the survey says.

Although now owned by ANZ Bank, National Bank retains its separate bank registration and was the largest home lender with its mortgage book growing 11.4% from $18.4 billion to $20.5 billion during the year.

ANZ Bank's own mortgage book grew from $12.4 billion to $13.4 billion over the year.

Bank of New Zealand doesn't appear to have suffered from its decision in July last year to stop dealing with mortgage brokers. Its home loan book grew from $11 billion to $13 billion, although its book remains the smallest of the five major banks.

ASB Bank's mortgage book grew from $13 billion to $15.2 billion during the year while Westpac's grew from about $14 billion to $15.9 billion.

Other registered banks have a small but growing slice of the pie, rising from $3.8 billion in 2002 to $4.5 billion last year.

KPMG says mortgage growth was particularly strong in Auckland, driven by immigrants and expatriates returning home.

KPMG banking and finance chairman Andrew Dinsdale says these figures show the New Zealand dream of home ownership is alive and well, although the lenders can claim an ever-increasing share of those homes.

While the survey provides no figures, Dinsdale says the market for non-conforming mortgages, lending to those outside accepted bank criteria, continues to grow.

"Today it seems that a poor credit history and uncertain income flows do not necessarily preclude a person from obtaining a mortgage and owning their own home," he says.

Although the market is competitive interest rate margins rose slightly. "This...primarily results from the repricing lag in the mortgage market where fixed-rate loans have benefited the financial institutions by way of enhanced interest margin," the survey says.

The survey found fixed-rate homeloans continue to command an increasing share of mortgage lending, about 66% in 2003 compared with about 60% in 2002.

ANZ and BNZ have the highest proportion of fixed-rate lending at about 70% of their total homeloan books while Westpac has the lowest at 58%.

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