Kiwibank's bold move
[UPDATED] Kiwibank has once again made an aggresive pricing change with its home loan rates as it seeks market share.
Thursday, November 17th 2011, 3:04PM 
10 Comments
Kiwibank is offering a limited time six-month home loan rate of 4.99%.
The six-month special rate requires a property owner to a have a minimum of 30% equity in the property, otherwise the bank's standard six-month rate of 5.65% applies.
Kiwibank chief executive Paul Brock said it is by far the lowest rate ever offered by the bank and significantly under cuts the other main banks.
"We've seized an opportunity to offer what we believe is a startlingly low home loan interest rate. We're looking to grow our mortgage portfolio and to pass through savings to customers," Brock said.
We have sorted the rates table on six month terms here. It shows Brock is correct. The rate is "startlingly low".
Kiwibank can make such a move as the banks are considered to have pretty fat margins on their lending rates at the moment.
We are told Kiwibank isn't using this offer as a loss leader, however it will be on tighter margins.
It also thinks that many borrowers will move from floating rates at the big banks to this six month rate and park their loan with Kiwibank.
This is all part of its strategy to grow its market share but also to get customers to shift from other banks.
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Comments from our readers
On 18 November 2011 at 9:20 pm Dallas said:
Hi Amused. great info thankyou for that. Look you mentioned earlier that you managed to get a 5.3% rate from westpac. They adamantly deny this. I only managed to get to 5.5%. If you ar a mortgsge broker. Do you want to re-negotiate my rate? if so please leave contact details. On 19 November 2011 at 10:39 am Amused said:
Hi Dallas you're welcome. Interesting that Westpac would say that to you. I managed to negotiate a floating rate of 5.39%. for a Westpac client yesterday albeit it's a new mortgage been settled in a month's time. There are many variables at play with the banks offering discounts on their floating rates i.e. loan to value ratio, amount of lending involved etc etc so it may be that 5.50% p.a. is the most you will get from Westpac in your case. I generally also find the banks are more competitive on interest rates for new customers whereas existing home loan customers are priced differently. Unfortunate but true. 5.50% p.a. is still a good floating rate and Westpac unlike most of the other banks will apply the discount to your loan for as long as it remains floating. Most banks will only offer discounts for 12 months on floating rates before you need to re-negotiate them again. The reality is however that this time next year we could well be in an environment where interest rates have started moving upwards and borrowers have started to fix instead to have certainty with their repayments. Floating rates will then be less attractive to the majority of people with a mortgage. On 21 November 2011 at 11:08 am Anonymous said:
I get a 5.00% floating rate from Westpac so what about that...They say they give it to me cos I'm a NZICA member so I am special. The fact is though that even law society and other institute memberships get the same floating rate. Plus, all other major banks match that rate as well although they do not go out and publicly advertise this fact...
And heres me thinking how much margin they are making on the normal floating rate of 5.75%???
P.S: Lots of mortgage brokers don't know this as well or PRETEND to not know this...
On 22 November 2011 at 10:28 am ian said:
Interesting the "state owned" bank is the one driving rates down, enticing people to borrow....FOR PROPERTY....against all that the Reserve Bank is trying to discourage....
Then they come out and claim to be hugely successful, if buying business is a success I'd like to be govt owned too :-)
Their service is rubbish and, as amused points out, if you dig past the smoke and mirrors their offers aren't all that anyway
On 23 November 2011 at 2:54 pm Hmmmm said:
Amused and others, please do your research.
BNZ charge $150 refix fee, ASB $50
Plus all those other banks charge applications fees up to $400, and charge split loan fees and on top of that charge a low equity/high LVR extra rate penalty.
There's a lot of smoke and mirrors out there but please ensure a balanced argument and not the promotion of your own business on here.
By the way, whats wrong with driving rates down if its for the benefit of those that have saved a deposit? The other banks are doing it but behind the scenes as you've all shown, at least Kiwibank are up front and forcing the others hands......balance please..
On 23 November 2011 at 3:55 pm Craig said:
Interesting comments above.... I have recently settled my loan with Kiwibank and have found them brilliant to deal with. The Mobile Mortgage Manager was extremely helpful and provided us a number of options for our banking/mortgage package. I completed some research first and they have for a number of years now the been the best value bank out there from the CANSTAR awards and do lead the market generally in rates. The other banks only seem to react when Kiwibank move their rates... interesting to see what they have done to make banking a better place for everyone in New Zealand. I am wondering if 'amused' is a broker as I understand that Kiwibank doesn't deal with brokers so they might be a bit sour on that! I have been totally happy with my move. On 23 November 2011 at 4:29 pm Hmmmm said:
Amused and others, please do your research.
BNZ charge $150 refix fee, ASB $50
Plus all those other banks charge applications fees up to $400, and charge split loan fees and on top of that charge a low equity/high LVR extra rate penalty.
There's a lot of smoke and mirrors out there but please ensure a balanced argument and not the promotion of your own business on here.
By the way, whats wrong with driving rates down if its for the benefit of those that have saved a deposit? The other banks are doing it but behind the scenes as you've all shown, at least Kiwibank are up front and forcing the others hands......balance please..
On 30 November 2011 at 1:12 pm Amused said:
@ Hmmmm if you are paying $150 to BNZ and $50 at ASB Bank to refix your mortgage nowadays you are getting fleeced. Both banks will waive these costs to customers routinely. As for paying a loan application fee??? such costs to borrowers are a thing of the past at banks in NZ and I have not had one of my clients pay such a fee in the last 5 years.
As for Kiwibank been upfront to borrowers about how it compares to other banks above 80% lending in this age of full disclosure I see an avalanche of customer complaints coming soon when borrowers realise they could have saved thousands by having their home loan elsewhere other than Kiwibank.
Yes, let’s see some balance on this subject. It would be great if Good Returns did a story on this discrepancy between what Kiwibank & the other banks charge by comparison. This might indeed open a few eyes on here.
On 30 November 2011 at 2:05 pm Amused said:
Correct Craig, Kiwibank don't generally deal with mortgage brokers. They were piloting a scheme for a while back there but didn't meet the service and pricing expectations that most brokers have for their clients hence the actually got very little business submitted to them in the first place. Trust me though, when you compare Kiwibank to the other banks for a home loan nowadays any reasonably competent broker would never recommend them on either their service or pricing. They would be well down our list of banks/lenders with what deals we can secure for borrowers elsewhere. As for the CANSTAR awards last time I checked it seems like every bank in NZ was winning some different CANSTAR or CANNEX Award every month for best value or service. Most people in the banking fraternity actually place very little stock in such awards and you really shouldn’t choose your bank based on such things. Craig, you illustrate to me again sadly just how ill-educated the average borrower is in NZ when it comes to Kiwibank. If you’re happy you made the move across to them for your home loan I’m glad for you but the reality is you should have done your homework. Commenting is closed
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1)What will Kiwbank charge me to refix my mortgage next time round when my fixed rate with them expires? ANSWER = $100
2)What would my current bank charge me by comparison to refix my mortgage with them instead? ANSWER = Nothing
3)If I’m on a fixed rate with Kiwibank and I want to “lock in” a new fixed rate 60 days prior to my old rate expiring (and you’ll be thinking about doing this at some point in the future inevitably as interest rates start moving upwards) what would Kiwibank charge me? ANSWER = $250 + $100 for the actual refix on the day so $350 in total.
4)What will my current bank charge me to do likewise if I’m on a fixed rate with them instead? ANSWER = Nothing
5)If I want to “lock in” a new fixed rate at Kiwibank 60 prior to my old fixed rate expiring but also split my existing mortgage i.e. fix $250,000 for 2 years and $250,000 for 3 years what will Kiwibank charge me to do this? ANSWER $350 per loan portion i.e. $700 in total.
6)What would my current bank charge me if I wanted to split my mortgage similarly above with them? ANSWER = Nothing
So, now that we have some transparency on how Kiwibank can offer this rate to borrowers people can make an "informed" choice as to whom they have their home loan with.